The Non Domiciled Concept and further tax benefits in becoming Cyprus tax resident

From Christodoulos G. Vassiliades & Co LLC on the issue of  the Non Domiciled Concept: 

The Non Domiciled Concept and further tax benefits in becoming Cyprus tax resident

A Cyprus tax resident individual who spends more than 183 days in the Republic of Cyprus would only be liable for Income Tax Law purposes and would be exempted from Special Defence Contribution (SDC) given that such individual is not considered domiciled in Cyprus.

Consequently that individual would be exempt from SDC regarding income from dividends, interest and rent irrespective of whether such income derives from sources in Cyprus or abroad.

In this manner, and also bearing in mind the exemptions applicable under Cyprus Income Tax Law, dividends and interest received both from Cyprus and worldwide sources would be totally exempt from tax in Cyprus.

An individual is not domiciled in the Republic of Cyprus if:

1.  An individual does not have domicile of origin in Cyprus;

AND

1. 2.    The individual was Cyprus tax resident for less than 17 out of the last 20 years before the relevant tax year;

More tax incentives for foreign individuals to relocate and become Cyprus tax residents:

Personal Income tax rates for employment income in Cyprus vary from 0 to 35% (the first €19, 500 earned being tax free) with the following exemptions:

• Relief for highly paid individuals employed in Cyprus

50% exemption applies to non-resident individuals who reside in Cyprus for the purpose of employment with income exceeding €100, 000 per annum for a period of 10 years.

• Relief for non-resident individuals employed in Cyprus

20% exemption on the remuneration received, with a maximum amount of €8, 550 from any office or employment exercised in Cyprus by an individual who was not a Cyprus resident before the commencement of the employment. The exemption applies for a period of 5 years but it can only be claimed until the year 2020.

• Employment income from working abroad

100% exemption on the remuneration income of a Cyprus tax resident individual for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer;

• Pension received by a resident individual in respect of past employment exercised outside Cyprus

Pension received in respect of past employment exercised outside Cyprus is taxed in Cyprus at a rate of 5% on amounts in excess of €3, 420;

• 100% exemption on the whole amount of any gain arising from the disposal of titles such as shares and bonds;

• 100% exemption on any lump sum received as a retiring gratuity, commutation of pension, death gratuity or as consolidated compensation for death or injury;

• 100% exemption on any lump sum repayment from life insurance schemes or from approved provided funds;

• No estate duty, wealth tax, inheritance tax or gift taxes;

• No Capital Gains Tax on the sale of immovable property situated outside Cyprus.

• No Capital Gains Tax from the subsequent disposal of immovable property acquired between 16 July 2015 and 31 December 2016 in Cyprus.   

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