Prior to the introduction of the non-domiciled tax residency, the earned income generated in Cyprus or abroad, of any Cyprus tax resident was subject to special defence contribution (“SDC”) at the rate of 17% on dividend income and 30% on interest earned.
Upon introduction of the non-domiciled status, the income of individuals who are considered non-domiciled tax residents of Cyprus are subject to exemption from SDC on dividends, interest received and rental income, regardless of the income being generated in Cyprus or abroad.
As per the provisions of the Wills and Succession Law, an individual is considered to have domicile of origin in the Republic of Cyprus if the domicile of their father was on the island at the time of birth. This is subject to some exceptions for expatriates of Cypriot origin being allowed to be registered as non-domiciled under certain conditions.
An individual can be granted the status of non-domiciled tax resident when the below requirements are met:
- The domicile of their father was outside Cyprus at the time of birth
- Have a residence permit in the Republic of Cyprus
- Have been registered with the Tax Department of Cyprus
- Have a Tenancy Agreement or Purchased Property in Cyprus
- Have the intention of maintaining their tax residency in the Republic of Cyprus
Importantly, the validity of the non-domiciled tax residency is 17 years upon the year of obtainment.
In conclusion, individuals who are considered to be non-domiciles will be exempt from SDC payments on dividends, interest and rental income, even if they are considered tax residents of the Republic of Cyprus.