Should I become a Cyprus tax resident, non-domiciled?

Should I Become a Cyprus Tax Resident – Non-Domiciled?

If you’re looking to optimise your tax planning and live or do business in a low-tax EU jurisdiction, becoming a Cyprus tax resident and non-domiciled individual may be the perfect solution.

Since July 2015, Cyprus offers generous tax benefits to individuals who qualify as tax residents but are not domiciled in Cyprus.

What Changed?

The key change was to the Special Defence Contribution (SDC) — a tax that used to apply to certain types of income.

Now, individuals who are Cyprus tax residents but non-domiciled are fully exempt from SDC tax, meaning:

• No tax on dividends
• No tax on interest
• No tax on rental income (from SDC – income tax may still apply)

These benefits can last for up to 17 years, provided you haven’t been a Cyprus tax resident for 17 of the last 20 years.

What Was the Tax Before?

Before the 2015 change, Cyprus tax residents (even if non-domiciled) had to pay:

• 17% on dividend income
• 30% on interest income
• 3% on 75% of rental income (effective rate of 2.25%)

Those rates no longer apply to non-doms.

What Does “Non-Domiciled” Mean?

Your domicile is your permanent home — not necessarily where you live now.

Under Cyprus law, you’re considered domiciled in Cyprus if:

• You were born to a Cyprus-domiciled father (domicile of origin); or
• You have made Cyprus your permanent home with the intention to live here indefinitely (domicile of choice).

But: If you’ve been a Cyprus tax resident for 17 out of the last 20 years, you’re automatically treated as domiciled and can’t claim the non-dom tax benefits.

Real-World Example

Let’s take Mr. Smith, a UK citizen who becomes a Cyprus tax resident and non-dom. He is the sole shareholder and employee of a Cyprus company and earns:

• €150,000 salary
• €300,000 in dividends
• €50,000 in interest income
• Total: €500,000 per year

How much tax will he pay?

• He pays only around €20,000 income tax on his salary.
• He qualifies for a 50% income tax exemption because his salary exceeds €100,000 — valid for 10 years.
• He pays zero tax on dividends and interest.

Without the non-dom status, Mr. Smith would have paid an additional €66,000 in tax under the old regime.