The Cyprus Tax Residency & the Cyprus Non-Dom Regime

The Cyprus Tax Residency

In Cyprus, domicile is defined in two ways: (a) domicile of origin, which an individual inherits at birth, and (b) domicile of choice, which an individual acquires by establishing a permanent residence in a specific place.

The concept of “non-domicile” refers to individuals who are tax residents in Cyprus but do not have a domicile there, which entitles them to several tax advantages.

Determining Cyprus tax residency is based on either the:

(a) 183-day rule, where an individual is considered a tax resident if they spend at least 183 days (no need to be consecutive) in Cyprus within a calendar year; or the

(b) 60-day rule*, where an individual is considered a tax resident if they spend at least 60 days (no need to be consecutive) in Cyprus within a calendar year and meet the following conditions: (i) not residing in any other single country for more than 183 days in the same year, and (ii) not be a tax resident of any other country, and (iii) maintaining a permanent residence (owned or rented) in Cyprus, and (iv) engaging in business or employment or holding an office in Cyprus (with a legal or natural person resident in Cyprus) at any time during the tax year, provided that such activities are not terminated during that year.

*Based on a Cyprus tax reform that will be implemented by end of 2025 / early 2026, the 60-day Tax Residency Rule will be extended to include individuals whose center of business interests is in Cyprus, irrespective of their physical presence.

The Cyprus Non-Dom Regime

The Cyprus non-Dom Regime due to its simplicity, transparency, and an unparalleled package of benefits makes it a top choice for non-domiciled individuals such as asset managers and entrepreneurs seeking a tax-efficient jurisdiction.

Key Benefits

1. 50% Exemption Rule: Non-doms who earn an annual income of more than €55,000 annually who take up first employment in Cyprus (provided they were resident outside Cyprus for at least 15 consecutive years before their employment in Cyprus commenced), may be applicable to a 50% exemption of their employment income in from sources in Cyprus, applicable for 17 years commencing from the year of employment.

2. 20% Exemption Rule: Non-doms who take up first employment in Cyprus but do not qualify under the 50% Exemption Rule, may be eligible for a 20% or €8,550 exemption (whichever is lower) from their employment income from sources in Cyprus, provided they were resident outside Cyprus for at least 3 consecutive years before their employment in Cyprus commenced. This exemption is applicable for 7 years commencing from the year following the year of commencement of employment in Cyprus.

3. Non-doms are exempt from Special Defence Contribution tax on dividends, interest and rental income.

4. Income earned from providing employment services abroad to a non-resident employer or to a foreign permanent establishment of a resident employer, for a duration of more than 90 days but less than 183 days within the tax year is not subject to income tax.

5. 100% exemption on lump sum payments from life insurance schemes or from approved provident funds.

6. Pensions received in respect of past employment abroad are exempt from tax up to €3,420 and are taxed at a flat rate of 5% for amounts exceeding €3,420 per year.

7. 8% tax available to fund managers of specific Cyprus-based funds in regard to earnings from carried interest, subject to conditions.

8. No inheritance tax.

9. No wealth tax.

10. No gift tax.

11. Capital gains tax is only imposed on the disposal of immovable property situated in Cyprus and on the transfer of shares directly or indirectly held in companies (other than listed shares) in which the underlying asset is immovable property situated in Cyprus and at least 50% of the fair market value of the shares is derived from the immovable property.

12. The sale of immovable property situated outside Cyprus is exempt from capital gains tax.

13. Income received from a qualifying scholarship, exhibition, bursary or other educational grants is not subject to income tax.

14. Salaries of officers and crew of ships owned by a Cyprus shipping company sailing under the Cyprus flag and function in international waters are not subject to income tax.

Why Cyprus Offers More Than You Expect

Cyprus offers a high quality of life supported by a business-friendly and family-oriented environment, making it an attractive destination for both professionals and families. The country boasts high-level schools, a low crime rate, and widespread use of English, ensuring ease of integration. Its robust legal system, based on English common law, provides legal clarity and confidence, while EU membership adds to its overall stability. Strategically located at the crossroads of Europe, Asia, and Africa, Cyprus enjoys a sunny, warm climate year-round, further enhancing its appeal as a safe, stable, and welcoming place to live and work.

Who we Are

A. KOULOUNDI & CO. LLC is a boutique Cyprus law firm with a global outlook. We deliver clear, forward-thinking legal advice to private clients, family offices and businesses. Together with our corporate and fiduciary services company, we offer a fully integrated legal, regulatory and fiduciary platform. Everything you need – from legal services and advisory structuring, to company formation and ongoing company administration – is handled by one trusted team.

What Legal and Tax Services our Clients Enjoy

• Banking & Finance;
• Corporate & Commercial;
• Family Office Advisory;
• Immigration & Relocation;
• International Tax Structuring;
• Real Estate;
• Regulatory & Compliance Advisory;
• Succession & Family Governance;
• Trust & Estate Planning;
• Trustee Advisory.

What Fiduciary Services our Clients Enjoy

• Bank Account Openings in Cyprus and abroad;
• Corporate Secretarial;
• Corporate Administration;
• Nominee Services (director, shareholder, reg. office, secretary);
• Professional Trustees & Protectors.

Cyprus awaits as your new family and business home.

Contact anna@kouloundilaw.com for more information.