The Republic of Cyprus has an open economy, characterized by a remarkable resilience over the years. As we are reaching the yearend 2021 and by looking at the recent past, we can confidently state that the foreign direct investments are on the rise, whereas new investment opportunities are been continuously created in traditional and emerging sectors.
The Special Contribution for the Defence of the Republic Law N.117 (I) of 2002 as amended (the “SCD”) is, without a doubt, the most significant amendment which contributed to the direct encouragement of high-net-worth Individuals to choose Cyprus as their location for residence and investment / business.
In theory, Cyprus Tax Residents are liable to SCD at the rate of 17% on dividends, 30% on bank deposit interest and 3% on rental income. However, the amended SCD distinguishes the Cyprus Tax Residents into those who are domiciled in Cyprus and those who are not, thus introducing the notion of “non-domiciled” Individuals or, otherwise, “Non-Doms”.
Non-Doms are exempted from the following:
- Special Defence Tax;
- Taxation on dividends;
- Any passive interest that they receive;
- Rental income;
- Capital gains (other than on the sale of immovable property in Cyprus – subject to a partial exemption on newly acquired property);
- Capital sums received from a pension, provident or insurance fund.
In accordance with the rules of the Wills and Succession Law Cap. 195, the term “domicile” is distinguished into:
- A domicile of origin (i.e. the domicile received by an Individual at birth); and
- A domicile of choice (i.e. the domicile acquired by an Individual by establishing a home with the intention of a permanent or indefinite stay).
From the definition “domiciled in Cyprus” as introduced in the Income Tax Law of 2002 (118(I)/2002) as amended, the following people are exempted and are known as “Non-domiciled”:
- Individuals who obtained and maintained a domicile of choice outside Cyprus (and were not Tax Residents in Cyprus of at least 20 consecutive years);
- Individuals who were not Tax Residents of Cyprus for a 20-years period, prior the introduction of the SCD (16th day of July, 2015).
Irrespective of the domicile of origin, an Individual who remains a Tax Resident of Cyprus for a period of at least 17 years, out of the last 20 years prior to the tax year in question, shall be deemed as domiciled in Cyprus for SDC purposes.
For any specific clarification on this subject, book your appointment at https://www.gclawfirm.eu/contact-us/