Most people know Cyprus as a vacation island in the eastern Mediterranean. Since 2004, the Republic of Cyprus is a member of the European Union. But Cyprus has much more to offer than a beautiful vacation island in Europe. Economically, especially after the banking crisis in 2013, Cyprus has recognized the signs of the times and has become the first address for companies, individuals and digital nomads within the EU.
This article is part of the TaxFree Matrix series on “Relocation“.
Non Dom Cyprus and its benefits
To understand the Non Dom status, we must look at the history of the British Empire. The basis of the Non Dom program is an English tax law with centuries of tradition. At that time, this tax law exempted the profits gained in the colonies from the income tax of the mother country. And it is exactly this heritage of the Non Dom Status that the government in Cyprus has discovered for itself and adapted to today’s times.
With the Non Dom status, the foreign resident in Cyprus has the advantage of guaranteed not to pay taxes on dividend income from home and abroad for the next 17 years. Thus, Cyprus creates a classic win-win situation. On the one hand, Cyprus gains financially strong individuals and entrepreneurs in this way, and on the other hand, they benefit from the tax exemption in Cyprus. And Cyprus is not only attractive for a residence but also for the company formation. The Mediterranean island neither levies a business tax nor does an external tax law exist. The non-existence of an external tax law becomes interesting if you leave Cyprus and want to take your assets with you tax-free.
Requirements for the Non Dom Cyprus
Compared to other countries, it is unproblematic and can be implemented in a few weeks to change your residence to Cyprus.
For the registration in Cyprus the following documents are needed:
- valid passport
- valid tenancy agreement as proof of residence
- Cypriot social security number
A Cypriot social security number is obtained when one company formation in Cyprus and employs oneself through one’s company.
This gives one the following benefits:
- Obtaining the tax number required for non-dom status.
- Full social security coverage
- Monthly salary can be determined individually
- No income tax up to an annual income of EUR 19’500.00
Those who wish to pay themselves a salary above EUR 19,500.00 per year also benefit from low taxes in Cyprus. The top income tax rate is only 35% for incomes above EUR 60,000.00 per year. With non-dom status, this can be halved to 17.5% for the next 5 years.
Non Dom Stauts in Cyprus – Overview
The Non Dom Cyprus offers tax advantages especially for foreign entrepreneurs and individuals who want to move their residence to Cyprus in the future.
No taxes on dividends
A foreign person with Non Dom status, will no longer be subject to SDC taxation since July 16, 2015. This means: dividend income from domestic and foreign sources, are exempt from taxes for 17 years.
No taxes on interest income
A foreign person with non-dom status, will be completely exempt from taxation on interest income for 17 years. This applies to both domestic and foreign interest income.
Tax rate on income tax halved
A person with Non Dom status who receives more than EUR 100,000.00 as salary will be taxed only at half the income tax rate for the next 5 years. Under certain circumstances, this rule can even be extended to 10 years.
Special rule for rental income
There is also a special rule for domestic and foreign rental income with the non-dom status. Rental income is no longer subject to defense tax, but to income tax and thus at a reduced rate.
Cyprus and the Non Dom status is very suitable for digital nomads and entrepreneurs who want to move their residence to Cyprus. Through the Non Dom program, it is possible to live completely tax free for the next 17 years with a company and residence in Cyprus.