Introduction
Cyprus is increasingly recognised as an attractive jurisdiction for individuals seeking favourable tax treatment. The Cyprus taxation system is based on residency, with two main criteria for determining tax residency: the 183 days rule and the 60 days rule. Cyprus tax residents are subject to taxation on their worldwide income, while non-tax residents are taxed only on income from sources within Cyprus.
Two of the main pillars of this regime are the tax residency rules (the ‘183 day rule’ and the ‘60 day rule’) and the non-domiciled status (‘non dom’). Together these allow significant exemptions on various forms of passive income for qualifying persons. This article sets out how these rules work, how non-dom status is defined and what the tax benefits are.
Tax Residency Rules in Cyprus
To be treated as a tax resident of Cyprus (for personal income tax purposes), an individual must satisfy one of two main criteria:
A. The 183-day rule
An individual who spends more than 183 days in Cyprus in a tax (calendar) year is automatically a tax resident.
B. The 60-day rule
An alternative path to residency if all the following conditions are met in a tax year:
- The individual spends at least 60 days in Cyprus.
- The individual does not spend more than 183 days in any other single state in aggregate.
- They are not a tax resident in any other country under that other country’s rules.
- They have a permanent home in Cyprus (owned or rented) during that year.
- They engage in some business activity, are employed in Cyprus, or hold a directorship in a Cyprus tax resident company; and this arrangement is not terminated during the tax year.
Meeting either the 183-day rule or the 60-day rule makes one a tax resident of Cyprus, which means that an individual becomes taxable in Cyprus on their worldwide income (rent, interest, dividends, salaries, etc.) subject to the usual income tax laws.
One of the most common ways to obtain tax residence in Cyprus is through the registration of a Cyprus company which will employ you.
Personal Taxation Benefits
- Taxable Income: First €19,500 is tax-exempt, with progressive rates from 20% to 35% applied thereafter.
- Pensions: Foreign pensions are taxed at only 5% for amounts exceeding €3,420 annually, with an option to be taxed under the normal personal income tax rates.
- Capital Gains Tax Exemptions: Profit from the sale of shares, securities, or immovable property outside Cyprus, is exempt from Cyprus tax. Capital Gains Tax on the sale of immovable property situated in Cyprus is imposed at the rate of 20%.
- No Inheritance, Wealth, or Gift Taxes.
- 50% exemption for remuneration from employment exercised in Cyprus by persons who were resident outside Cyprus before commencement of their employment. The exemption applies for a period of 10 years commencing from the year of employment if such income exceeds €100,000 per year.
- Foreign income such as dividends, interest, and rental income is exempt from the Special Defence Contribution tax, for 17 years, but only for individuals who have obtained or qualify for non-dom status.
Non-Domiciled Status
Being a tax resident is one thing; domicile is separate, and it determines eligibility for certain exemptions under Cyprus law, especially the Special Defence Contribution (‘SDC’). A tax resident in Cyprus and domiciled in Cyprus will be subject to payment of SDC on interest, dividends, and rent received, while a non-domiciled (qualified for non-dom status) will be exempted from SDC.
Domiciled tax residents pay SDC tax as follows:
- 17% on dividends.
- 17% on interest. Interest received in the ordinary course of trade is exempted.
- 3% rental income (only 75% of the gross rental income is taxable under the SDC law).
Non-dom status means being a tax resident but not being domiciled in Cyprus for the purposes of the SDC.
Defining the concept of ‘Domicile’:
- Domicile of Origin: Usually acquired at birth (often from the father in Cyprus law) and persists unless certain conditions change.
- Domicile of Choice: Acquired if one establishes physical presence with the intention to make it the place of permanent residence.
In practice, individuals wishing to verify their non-domiciled status must obtain the relevant certificate from the Cyprus Tax Department through the submission of relevant application and supporting documentation.
Who Can Benefit from Cyprus Tax Residency and Non-Dom Status
- Individuals who have passive income (dividends, interest, royalties) and want to minimise taxes on those.
- High net worth individuals seeking a base in the EU with favourable tax on investment income.
- Retirees with foreign pension income.
- Professionals who can live partly in Cyprus under the 60day rule and keep business/employment or director roles tied to Cyprus.
- Investors trading securities, seeking capital gains exemption.
Conclusion
Cyprus offers a highly attractive tax regime for both individuals and businesses, especially after the recent abolishment of the UK’s non-dom status. By becoming a Cyprus tax resident under either the 60-day or 183-day rule, individuals can take advantage of the island’s favourable non-domiciled regime, which provides generous exemptions on passive income.
The application process is straightforward, and Marilena Shambarta Law Office is here to guide you every step of the way. We assist with all relevant applications and approvals, ensuring you maximize the tax advantages Cyprus has to offer.
23 September 2025
Disclaimer: The information provided in this note is for general informational purposes only and should not be used as professional or formal legal advice.
If you need assistance, please contact MARILENA SHAMBARTA, Advocate & Legal Consultant, Licensed Insolvency Practitioner, Mediator at 00357 99446150 or send an email to msh@marilenashambarta.com