Non Dom Rules

Individual Tax Residence Rules
An individual who spends time in Cyprus exceeding 183 days in a tax year (1st January to
31st December) will be able to avail of tax residency in Cyprus. By deduction if an individual
is present in Cyprus for less than 183 days in a tax year, he or she will be deemed to be a nonCyprus tax resident in that tax year.

The Incentivised Tax Residency Rules
As of 1st January 2017, the above tax residency rules have been amended to also provide that, an individual who does not reside in an alternative state, for one or more periods exceeding in aggregate 183 days in the same tax year and is not tax resident in any other country for the same year, is deemed as a resident in Cyprus in that tax year, if all of the following conditions
are met:
(i) the individual resides in Cyprus for at least sixty days in a particular tax year,
(ii) Conducts a business and/or is employed in Cyprus and/or holds an office with a Cyprus
tax resident company at any time during the tax year,
(iii) Acquires or rents a permanent residence in Cyprus.

Exceptions
An exception to the above rule is that an individual that nevertheless meets all the above conditions shall not be treated as a Cyprus tax resident in that particular tax year, if during that year the exercise of any kind of business in Cyprus and/or employment in Cyprus and/or holding of an office with a tax resident person in Cyprus, is interrupted or terminated. For the
calculation of the appropriate days spent in Cyprus should be calculated as follows:
a) The day of departure from Cyprus is deemed to be a day outside;
b) The day of arrival in Cyprus is deemed to be a day residing in Cyprus;
c) The arrival in Cyprus and the departure from Cyprus in the same day is deemed to
be a day in the Republic;
d) The departure from Cyprus and the arrival in Cyprus in the same day is deemed to
be a day outside the Republic;

Domicile
Under the revised provisions of the Tax law, the definition of "Domicile" carries the one
adopted by the Wills and Succession Law of Cyprus:

• A domicile of origin defined as the domicile received by an individual at birth; and, A domicile of choice defined as the domicile acquired by an individual by establishing residence with the intention of a permanent or indefinite stay.
• A person who is domiciled in Cyprus by way of origin will be treated as possessing tax
  domicile in Cyprus for the purposes of the Special Defence Contribution (the "SDC") with the
  exception of:
• An individual who has obtained and maintained a domicile of choice outside Cyprus under the provisions of the Wills and Succession Law, provided that this individual was not a Cyprus tax resident for a period of at least 20 consecutive years prior to the tax year in question; or
• An individual who was not a Cyprus tax resident for a period of at least 20 consecutive years immediately prior to the entry into force of the introduced provisions (i.e. prior to 16/07/2015).
• Irrespective of his/her domicile of origin, an individual who remains 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, shall be deemed as domiciled in Cyprus for SDC purposes

Special Defence Contribution
Pursuant to the provisions of the Cyprus tax laws, an individual who is a tax resident of
Cyprus under the provisions of the Income Tax Law by either residing more than 183 days or
residing for sixty days as per above criteria shall deemed to be non domiciled, and thus will
be exempt from the payment of any taxes categorised under the Special Defence Contribution.
Under the SDC regulations, Companies' dividends and interest income earned by individuals
who are tax residents and domiciled in Cyprus, are subject to tax at the rate of 17% and 30%
respectively, regardless of the source of the income (i.e. from Cyprus or from abroad). Rental
income is also subject to tax at the rate of 3% on 75% of the gross amount. Therefore, tax
residents but non-domiciled individuals will enjoy dividend, interest and rental income free
from SDC tax in Cyprus

Further Income Tax Allowances
Additional concessions to the above include the following exemptions. Individuals who were
based overseas and who were not Cyprus tax-residents before the commencement of their
employment in Cyprus, may be entitled to one (but not both simultaneously) of the following:

1. Individuals who are employed in Cyprus with an annual income in excess of €100.000
   will be eligible for an exemption from taxation of 50% of their income for a period of
   10 years, commencing from the year of employment. This is given with a caveat that
   the exemption is not applicable to an employee who was a tax resident in any three out
   of the five years preceding the year of employment and to an employee who was
   resident in the year preceding the year of commencement of employment.
2. Individuals who are employed in Cyprus and were not tax resident in Cyprus prior to
   commencing such employment, will be eligible for an exemption from taxation of
   20% of their income or €8.550 (whichever is lower) from any employment which is
   exercised in Cyprus. This exemption applies for a period of five (5) years commencing from 1st January of the year following the year of commencement of suchemployment and notwithstanding this, it is applied up to and including the year 2020.

Overseas Pensions

• Overseas pensions are exempt from tax up to €3.420 and taxed at 5% thereafter. The taxpayer may opt to be taxed in the normal way, where this special mode of taxation of income results to a higher tax liability (this selection can be made from year to year). Exempt
  
  Nicosia, March 2020.