Cyprus Introduces ‘Non-Domicile’ Status to Enhance Tax Competitiveness
On 9 July 2015, the Cypriot House of Representatives approved a series of significant amendments to the national tax legislation, reinforcing Cyprus’s position as a competitive and investor-friendly jurisdiction. Among the most impactful changes was the introduction of the “non-domiciled resident” (non-dom) status.
Previously, Cypriot tax residents were subject to both regular income tax and the Special Contribution for Defence (SDC) on certain types of passive income, with rates as follows:
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30% on interest income
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17% on dividend income
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3% on 75% of rental income
Additionally, the SDC law covered deemed dividend distributions from Cypriot-resident companies to their resident individual shareholders.
Tax residency in Cyprus is determined by physical presence—specifically, spending at least 183 days in the country within a calendar year, irrespective of the purpose of stay or ownership of accommodation. The calculation of days is precise:
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Day of departure counts as a day outside Cyprus
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Day of arrival counts as a day in Cyprus
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Same-day arrival and departure = one full day in Cyprus
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Same-day departure and return = day outside Cyprus
Under the revised legislation, the SDC now applies only to individuals who are both tax residents and domiciled in Cyprus. Therefore, individuals who are Cyprus tax residents but qualify as non-doms are fully exempt from SDC on interest, dividends (actual or deemed), and rental income—irrespective of origin or remittance.
Cyprus law defines domicile in accordance with its Wills and Succession legislation. A person is considered domiciled in Cyprus if they either acquire it by birth or adopt it by establishing permanent residence with the intention of indefinite stay.
These new provisions are expected to significantly enhance Cyprus’s appeal to high-net-worth individuals (HNWIs), investors, and corporate executives, fostering greater relocation and long-term residency on the island.