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Zypern NON-DOM

It might be the right time to move (your base) to Cyprus.

In order to accelerate economic development andto attract foreign investment through tax incentives, the Government of Cyprus introduced a major tax reform. The changes are extremely positive for international entrepreneurs who conduct business through Cyprus.

Introducing „non domicile“ rules for individuals

The government’s aim is to provide incentives to High Net Worth Individuals (HNWI) to relocate to Cyprus. By attracting such individuals Cyprus will be tremendously improving its position as an international business centre with major positive impacts on the Mediterranean island’s economy.

Up to July of 2015, income of passive nature such as interest, dividends and rents received by Cyprus tax resident individuals was heavily taxed. This was of course a major hindrance for HNWI’s to become Cyprus tax residents since their worldwide passive income, especially dividends, would suffer a heavy taxation in Cyprus.

The challenge was to find an inspiration for international entrepreneurs and HNWI’s whilst to maintain the above taxation for local native individuals.

The answer to that was the introduction of the „Resident but not Domicile“ tax status. Under the new law, tax resident individuals that are of non-Cyprus domicile status will be exempt completely from paying taxes on dividends, rent and interest, irrespective of where the income is generated or remitted.

Legal Terms

The term „Domiciled in Cyprus“ is defined as an individual who has a Domicile of Origin, in accordance with the Wills and Succession Law, in Cyprus but it does not include:

  An individual who has obtained and maintains a Domicile of Choice outside Cyprus in accordance with the Wills and Succession Law, provided that the individual was not a Cyprus tax resident for a period of 20 consecutive years preceding the tax year under examination.
  An individual who has not been a Cyprus tax resident for a period of at least 20 consecutive years before the commencement of the law.
  In addition, individuals who are considered as Cyprus tax residents as defined by the Income Tax Law for at least 17 years from the last 20 years before the year of assessment are considered as „Domiciled in Cyprus“ will therefore be subject to the relevant taxation if and when this condition will be met.

No doubt Cyprus is a favourable place and solution for relocation and global taxation purposes. The geographical position, the beautiful weather, the healthy Mediterranean cuisine, the ease of doing business and the fact that English is spoken almost everywhere make the island an excellent choice for relocation.

Facts

What is the effective date of the amendment?
The above provisions of the legislation took effect on 16 July 2015.

What were the SDC rates applicable to Cyprus resident non-dom prior to 16 July 2015?
Prior to the above amendment of the SDC law, Cyprus resident non-dom individuals were subject to SDC as follows:

  Dividend income at 17%
  Interest income at 30%
  Rental income at 3% (on 75% of the income i.e. effective rate of 2.25%)

What is the outcome of the introduction of Cyprus non-dom after 16 July 2015?
Following the amendment to the SDC law, Cyprus resident non-dom individuals will no longer be subject to SDC.

Non-doms will immediately see a tax saving of 17% on dividends, 30% on bank deposit interest and, 3% on rental income.

However, an individual who is a tax resident of Cyprus for a period of at least 17 out of the last 20 years prior to the tax year of assessment cannot benefit from the above exception.

Taxation of dividends for Cyprus resident non-doms?
A non-dom earning dividend income, from foreign as well as local investments will not be subject to SDC as of 16 July 2015. In addition, dividend income is unconditionally exempt from Income Tax. Therefore the tax payable by a Cyprus resident non-dom on dividend income will be zero.

Taxation of interest income for a Cyprus resident non-doms?
A non-dom earning interest income, from foreign as well as local sources, will not be subject to SDC as of 16 July 2015. In addition, interest income is also exempt from Income Tax. Therefore the tax payable by a Cyprus resident non-dom on interest income will be zero.

Taxation of rental income for Cyprus resident non-doms?
A non-dom earning rental income, from properties in Cyprus or abroad, will not be subject to SDC as of 16 July 2015. Rental income will only be subject to Income Tax at the normal rates (following a 20% allowance).

Non Domiciled persons (physical individual persons) will be entitled to obtain tax free income arising from Dividends and Interest , where as the taxation of Rental income will be subject to Income tax (after allowing for a deduction of 20% ) , but all will not be subject to SDC tax meaning a saving of 17% Dividend Tax, 30% on bank deposit interest Tax and 3% of Rental Income tax

Case Studies

A business owner becoming a Cyprus Tax Resident (CTR)

A Cyprus tax resident (CTR) who is non-dom for Cyprus tax purposes, would be exempt from taxation on dividend income and/or interest income.

X is moving to Cyprus and setting up a company becoming a CTR.

He finds a beautiful home by the sea; he and his wife enjoy the beautiful weather, beaches, the healthy Mediterranean cuisine and lifestyle.

The new Cyprus company employs him,he receives a monthly salary, receives a CY Tax ID and become a CTR non-dom. The salary is structured to have a minimal burden or no income tax at all.

X owns 2 international/offshore businesses that pay dividends on a quarterly basis. Before X became a CTR he paid heavy taxes in his country of residence. As a CTR the dividends received are now tax exempt.

International entrepreneur taking advantage of the CTR non-dom rules

XX is an entrepreneur moving to Cyprus to become a CTR non-dom. He owns several businesses worldwide and receives monthly income. His income is heavily taxed in his country of residence.

Apart from the fact that the weather in Cyprus is perfect all year long, his decision to set up base in Cyprus was positively affected by the geographical location of Cyprus, the excellent flight connections to Europe and the flight time to Dubai and Malta, where 2 of his businesses are located.

He has restructured his existing businesses and receives nowdividends.Dividends received by a CTR non-dom are completely exempt from taxation in Cyprus.

XX is a savvy businessman knowing that it is advisable to spread assets. He owns a company in the United Arab Emirates with a linked bank account. Due to the security and stability of UAE banks, he holds a great part of his liquid assets in the UAE.

All of his international business activities and asset protection steps fully comply with the Cyprus tax laws. He spends a little more than 183 days in Cyprus to remain a CTR non-dom and travels as he used to do before he became a CTR non-dom.

Firmengründung Zypern

All the above provide you with the opportunity to consider the setting up of a Cyprus company which can be a stand alone individual company or a holding company of the shares of any other companies you may have outside Cyprus and enjoy obtaining the dividends from these companies at no tax as these would first come to the Cyprus holding company and then from the Cyprus Holding company to you or accordingly from your stand alone company to you.

In conjunction with other incentive schemes provided within the income tax legislation, for example the first employment in the republic scheme allowing you to obtain a 50% tax saving on your income if this is higher than 100k per annum for the first five years following your employment (and with the proposals of the new legislation that was not voted yet – to be extended to 10 years ), we are very confident that this will form a very attractive incentive for you to consider becoming a Cyprus Non Dom.

What we can do for you

RELOCATION

In recent years the numbers of expats moving to other countries have increased.

Those who emigrate can enjoy beautiful beaches, a busy social life and the chance to explore a very different landscape to that from home. Life can be expensive but in some areas it is easy to achieve a high quality of life for less than at home because you are paying no or less tax and more of your earnings are yours to spend.

A simple way to organise your fiscal status –

Relocation to Cyprus

Individuals can drastically improve their tax obligation by relocating to Cyprus. Cyprus doesn’t tax dividend income received overseas or distributed to Cyprus.

However, to take advantage of becoming an expatriate in Cyprus, certain conditions must be fulfilled in accordance with the tax law.

Fiscal residence in a new country

Life in a new country offers both opportunities and challenges.
There are many people who share the dream of living a better life in a different country.
If you are unsure about your personal tax obligations, you should seek professional advice before contacting us.

We understand expat life

We can give you the support you need becoming an expat and prepare for the future. We’ll also help you understand your tax obligations both at home and abroad.

Offshore banking benefits

If you live away from your home country and meet their non-residency requirements, you may be able to benefit from investing your money offshore. There are many benefits to investing offshore.

As with most offshore investments, the major advantages revolve around tax reduction although the other consideration is that offshore funds may only be available to non-residents.

What exactly can we do for you?

If you are thinking of setting up your own business in Cyprus or moving abroad to improve your current tax obligations we can help you. With careful planning you can become a non-dom in Cyprus.

Accommodation and schools

Expats moving to Cyprus will find plenty of available housing options, from furnished or unfurnished apartments, to houses, villas and maisonettes in complexes with shared pools.

Cyprus has state-sponsored education as well as private and international schools. The public and private systems are both open and accessible to expat.

How Safe is Cyprus?

The island is also well known for its safe and stable environment that makes it an ideal location for families and students. Cyprus in general is a family-friendly location with a low crime rate. Cypriots are known for their warmth and friendliness so visitors and foreign residents will have little trouble feeling safe and at home in Cyprus.

Once a British colony the country still accommodates many British nationals and Cyprus has the third highest percentage of foreign citizens in the EU. Also citizens from non-EU countries reside on the island and the expat community is large. Newcomers moving to a country with an already existing expat community benefit from this as it makes the transition process much easier.

Cyprus is an Easy to Reach Destination

With its excellent flight connections and first class airports, the island is perfectly placed for working and travelling within and beyond the European Union.

Many flights from the Middle East, Asia, Europe including Scandinavia and Russia fly non-stop to Cyprus on a daily basis.

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