Cyprus tax residency and non-domiciled rules

According to the Income Tax Law of 2002, under the “183-day rule”, an individual who spends at least 183 days a year in Cyprus is considered a tax resident. On 14 July 2017, the Cyprus parliament voted for a Cyprus tax law amendment adding a second test – the “60-day rule” – to determine Cyprus tax residency for individuals.

The “60-day rule” concerns individuals who do not fulfil the tax residency requirements in any country.

Read more about Cyprus tax system.

How to become a Cyprus tax resident under the 60-day rule?

To become a Cyprus tax resident based on the “60-day rule”, the individual must meet all of the following conditions:

• Remain in Cyprus for at least 60 days during the tax year in question; and
• Do not reside in any other single state for a period exceeding 183 days; and
• Is not tax resident in any other state; and
• Carry out business activities in Cyprus and/or work in Cyprus and/or be a director in a company that is tax resident in Cyprus at any time of the tax year in question; and
• Maintain a permanent residence in Cyprus.

What are the applicable tax benefits?

Benefits for tax residents of Cyprus include, among others:

• No income tax on dividends
• No income tax on interest 
• No wealth tax
• No inheritance tax
• No gift tax

More details below.

Individuals who are Cyprus tax residents, whether under the “60-day rule” or the “183-day rule”, are taxed in Cyprus on their worldwide income, but certain exceptions apply, as follows:

• A Cyprus tax resident individual but non-domiciled in Cyprus is exempt from taxation on his/her worldwide dividend and ‘passive’ interest income. An individual who does not have a “Domicile of Origin” in Cyprus is only considered to be domiciled in Cyprus for tax purposes when the individual has been a tax resident of Cyprus for a period of at least 17 years out of the last 20 years prior to the tax year in question.
• Profit from the sale of securities is exempt from tax in Cyprus. ‘Securities’ include, among other things, shares in local or foreign companies, bonds, debentures, options, etc, except in cases where the value of the shares derives from the value of immovable property in Cyprus.
• An individual who is going to be employed in Cyprus and his/her income will exceed €100.000, and, provided that he/she has not been a tax resident of Cyprus before the commencement of his/her employment in Cyprus, he/she will enjoy 50% discount on his/her income tax in Cyprus, for ten years.
• Income from employment carried out outside Cyprus is exempt from Cyprus income tax, provided that the employment exceeds 90 days per tax year.

Non-domiciled tax residents of Cyprus

Non-domiciled tax residents of Cyprus are those tax residents who:

• Do not have a domicile of origin or choice in Cyprus or
• Have not lived the last 17 out of 20 years before the tax year in Cyprus.

Who is domiciled in Cyprus?

A person is domiciled in Cyprus by domicile of origin and choice.

Domicile of origin is the domicile a person acquires at birth.

Domicile of choice means acquiring a residence in the Republic by choice (a person’s actions and initiative). The residence has to be permanent and indefinite. The relevant law is the Wills and Succession Law, sections 6-11.

Moreover, a person who is a resident of the Republic for at least 17 out of the 20 years before the tax year in question is considered to be domiciled in Cyprus, no matter their domicile of origin. The relevant legislation is the Special Contribution for the Defence of the Republic Law (Law 117 (I)/ 2002, as amended).

Benefits of non-domiciled tax residents of Cyprus

In brief, non-domiciled tax residents of Cyprus are entitled to:

• The tax benefits available to all tax residents of the Republic, and
• Exemption from paying the Special Contribution for the Defence tax (SDC tax).

Here is the table with all non-dom status benefits:

The SDC tax

The Special Contribution for Defence tax aims to boost the Republic's defence capability. The relevant legislation is the Special Contribution for the Defence of the Republic Law (Law 117 (I)/ 2002, as amended).

Non-domiciled tax residents of the Republic do not pay the SDC tax. To pay the SDC tax, individuals must be domiciled tax residents of the Republic.

Domiciled tax residents pay SDC tax as follows:

• 17% on dividends.
• 17% on interest. Interest received in the ordinary course of trade is exempted.
• 3% rental income (only 75% of the gross rental income is taxable under the SDC law).
• 3% on interest from government and corporate bonds.

Interest on compensation for disability or grievous bodily harm is exempted.

A person whose total annual income, including interest, does not exceed 12,000 euros may claim a return on the SDC tax on interest. Contributions over 3% will be returned.

Non-domiciled tax residents’ obligations

Non-domiciled tax residents of Cyprus still have to pay tax on:

• Income (with the abovementioned exceptions).
• Capital gains (gains from selling property like land, buildings and shares) with some general allowances under the Capital Gains Tax Law of 1980.
• The relevant municipality taxes for the area they live in.
• Tax for the General Health System.

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Frequently asked questions