Cyprus: New law introduces an attractive non-domiciled status by On 9 July 2015, the Cypriot House of Representatives voted on a number of significant amendments to the Cyprus tax legislation, further improving the attraction of the Cypriot tax system. One of the most important changes made was the introduction of the concept of a non-domiciled resident individual. Up until now, apart from normal income tax, Cypriot tax resident individuals were also subject to another form of taxation on certain types of income, called the Special Contribution for Defense (SDC), at the following rates: 30% on passive interest income 17% on dividend income 3% on 75% of rental income The SDC law also included provisions for the deemed distribution of profits of Cypriot tax resident companies where the shareholders (beneficiaries) of such companies are Cyprus tax resident individuals. An individual is considered a Cyprus tax resident if they are physically present in Cyprus for 183 days or more during a calendar year. The reason for being in Cyprus is not relevant, nor is it a condition that a Cyprus tax resident individual owns or rents accommodation in Cyprus. It is based solely on the number of days spent in the country. When calculating the number of days spent in Cyprus, the following conditions apply: The day of departure is considered as a day outside of Cyprus The day of arrival is considered as a day in Cyprus Arriving in Cyprus and departing on the same day is considered to be a full day in Cyprus Departing from Cyprus and arriving back on the same day is considered to be a day outside of Cyprus With the recent amendment, the SDC law will apply to an individual only if he or she is both a resident for tax purposes in Cyprus and is also domiciled in Cyprus. As such, a Cyprus tax resident individual who is not domiciled in Cyprus (non-dom) will not be subject to the SDC in Cyprus on any interest, rents or dividends (whether actual or deemed) regardless of the source, and regardless of whether such income is remitted to a bank account or used in Cyprus. No tax is imposed on individuals under the Income Tax Law on interest or dividend income. The SDC law defines the term domicile with reference to the Will and Succession Law of Cyprus. An individual may acquire a domicile of choice by establishing his or her home in Cyprus with the intention of permanent or indefinite residence. The new non-dom rules are expected to further encourage the relocation of corporate executives and encourage High Net Worth Individuals to take up residence in Cyprus.