Cyprus taxes have always been very low. For example, the corporate tax rate is only 12.5% and there is no Inheritance or wealth tax. Even so, still additional significant tax incentives including the introduction of the definition of a Non-Domicile Tax Resident in the Republic of Cyprus was announced on 16th of July 2015. This is revolutionary news!
Up to 16th of July 2015, Special Contribution for Defense (SCD) tax was due by Cyprus Tax Residents when arising on worldwide dividends (17%) on bank deposit interest (30%) and on rental income (3%)
Cyprus tax residency for individuals is solely determined by the number of days each person spends in Cyprus. Any person who is in Cyprus for 183 days or more in a calendar year is considered to be a Cyprus tax resident.
The new amendments enacted into law on the 16th of July 2015 introduce the concept of ‘Non-domiciled’ tax residents. Non-domiciled Cyprus tax residents will now not be subject to taxes on dividends, rental income (for SCD) and on bank deposit interest generated worldwide and in Cyprus. This is indeed revolutionary!
Any individual who has a domicile of origin other than Cyprus and has not been a Cyprus tax resident for at least 17 out of 20 consecutive years.
The new Non-Domicile Tax Resident principle will be particularly of interest for investors obtaining Cyprus citizenship. There are no tax implications on those obtaining passports if they reside outside Cyprus and do not become tax residents in Cyprus. Their income/dividends continue to be taxed by their respective countries of tax residence.
Furthermore, they can now spend respective amount of time in Cyprus during the year in order to turn tax residents and be exempted from paying taxes on dividends, bank deposit interests and rental income (for SCD) earned worldwide and in Cyprus.
