1. HIGHLIGHTS OF CYPRUS TAX SYSTEM & TAX BENEFITS FOR THE NON DOMICILE CYPRUS TAX RESIDENTS
By Marios Efthymiou Managing Director

4. “I THE CITIZEN”
ALEXEI VOLOBOEF

5. WORLDWIDE TAX RATES Tax rates vary between tax jurisdictions
STARTING FROM ……………. 0%
………. ENDING UP TO ………40%…..50% ……???

6. TWO TYPE OF TAXES
CORPORATE TAX
INDIVIDUAL TAX

7. CORPORATION TAX Tax Basis
A company is tax resident of Cyprus if its management and control is exercised in Cyprus. Some of the most important factors used for deciding the place where the management and control of a company is exercised are the following:
the place where the board meetings are held
the place where the majority of the board of directors lives
the place where the company has its central offices, from where the strategic decisions are taken
the place from where the company’s bank accounts are maintained.

8. CORPORATION TAX Cyprus Tax Residents
Companies tax residents of Cyprus are taxed on their whole income accrued or derived from all sources in Cyprus and abroad.
Non – Cyprus Tax Residents
Companies which are not tax residents of Cyprus are taxed on their income accrued or derived from business activities which are carried out through a permanent establishment in Cyprus and/or any other certain type of income arising from sources in Cyprus.

9. CORPORATION TAX Corporation Tax Rate
The tax rate for companies is 12.5%.
Tax is charged on a company’s taxable profit which may differ from the accounting profit because of tax adjustments either due to:
tax exemptions
non-deductible items
notional income / expense

10. CORPORATION TAX Tax Exemptions Interest income
Provided that the interest income arises from activities other than the ordinary activities of the company or closely related to the ordinary activities of the company.
Dividends
Profits from the sale of securities (as per tax circular 2008/13) ../List of investments.pdf
Profits of a permanent establishment abroad, under certain circumstances
Foreign exchange gains with the exception of exchange gain arising from the trading in foreign currencies and related derivatives

11. DEFENCE TAX
Special contribution for defence is charged on income earned by Cyprus tax residents only (physical persons and legal entities).
Non-residents are not subject to the defence contribution.
This includes both non-tax residents as well as tax residents who are non-domiciled.

12. DEFENCE TAX The rates of defence tax on income are as follows:
Dividends %
Interest income %
Interest received by an individual from Government Savings Certificates %
Interest received by an individual from Government Bonds %
Interest earned by an approved Prov. Fund 3%
Rental income (reduced by 25%) %

13. PHYSICAL PERSONS

14. INCOME TAX
An individual is tax resident of Cyprus if he/she remains in the Republic for a period exceeding 183 days in a tax year.
Where an individual is a tax resident in the Republic, tax is imposed on income accruing or arising from sources all over the world (both within and outside the Republic).
Where an individual is not a tax resident in the Republic, tax is imposed on income accruing or arising only from sources within the Republic.

15. Cumulative amount of tax
INCOME TAX
The tax rates for individuals are the following:
Taxable income
Tax rate
Tax
Cumulative amount of tax € %
0 – - – 20
1.700 – 25
2.075
3.775 – 30
7.110
10.885
Over 35

16. DEFENCE TAX Non-domiciled persons not liable to Defence Tax
Individuals who are not considered to be ‘domiciled’ in Cyprus, are exempted from the payment of Special Contribution for Defence Tax on dividends, interest and rental income, even if they are considered as tax residents of Cyprus.
For the purposes of the Law, an individual is considered as having his/her domicile in Cyprus if he/she is either:
a. An individual who has a domicile-of-origin in Cyprus, as defined in the Wills and Succession Law with the exception of:
(i) an individual who has acquired and maintains a domicile-of-choice outside Cyprus based on the provisions of the Wills and Succession Law and such individual was not a tax resident of Cyprus per the Income Tax Law for any period of at least twenty(20) consecutive years prior to the tax year of assessment; or
(ii) an individual who was not a resident of Cyprus per the provisions of the Income Tax Law for a period of at least twenty(20) consecutive years immediately before the amending provisions enter into force. Or
b. Irrespective of the (a) as stated above, an individual who was a resident of Cyprus as per the provisions of the Income Tax Law for a period of at least seventeen(17) years out of the last twenty(20) years prior to the tax year of assessment.

17. Changes in the SDC Laws -non dom(1)
SDC is payable only by individuals who are considered to be tax residents of Cyprus (as defined in the income tax laws), which effectively means an individual who physically spends at least 184 days in Cyprus every tax year.
SDC tax is payable on dividends, interest and rental income earned by a Cyprus tax resident individual from sources both within Cyprus and outside Cyprus

18. Changes in the SDC Laws - non domicile
The law has been amended so that individuals who are not considered to be “domiciled” in Cyprus would be exempt from payment of SDC on dividends, interest and rents, even if they are considered as tax residents of Cyprus.
An individual can be considered as domiciled in Cyprus either:
(i) by domicile of origin or
(ii) by domicile of choice, as defined by the Wills and Succession Law of Cyprus

19. Changes in the SDC Laws - non domicile
Individuals whose domicile of origin is in a country other than Cyprus, but who are considered tax residents of Cyprus, will not be subject to SDC in Cyprus (subject to the limitation in the following paragraph).
An individual, who during at least 17 out of the last 20 tax years has been a tax resident of Cyprus (applies in the case of individuals both domiciled and non-domiciled in Cyprus), will be considered as domiciled in Cyprus and become liable to SDC as from the 18th year onwards

20. TAX DEPARTMENT CIRCULAR & QUESTIONNAIRES
..\DOMICILE-NON DOMICILE DIAGRAM.pdf
..\2016_TD_38Questionnaire to determine place of origin ENG.doc
..\2016_TD_38Questionnaire to determine domicile of choice ENG.doc

21. Cyprus tax residency at 60 days
An amendment to the definition of “Cyprus tax resident individual” as included in the Income Tax Law 118 (I)/2002, was recently voted by the Cyprus Parliament. The amendment is effective from 1 January and provides for an individual to be considered as a Cyprus tax resident under the 60 days scheme under specific conditions.

22. Cyprus tax residency at 60 days
More specifically, the details of the amendment are as follows:
An individual will be considered as a Cyprus tax resident if he/she:
does not spend more than a total of 183 days in any country within a tax year; and
is not a tax resident of another country within the same tax year
and satisfies the following three conditions:
(a) remains in Cyprus for at least 60 days during the tax year;
(b) carries on a business in Cyprus or is employed in Cyprus or holds an office in a Cyprus tax resident company at any time during the tax year; and
(c) maintains a permanent residence in Cyprus (owned or rented).
All of the above conditions need to be satisfied in order for the individual to be considered as a Cyprus tax resident.

23. CONCLUSION
The key is to avoid the defence tax in order to collect all dividends, interest and rents free from defence tax
There are two keys you need to have to unlock the doors of success in avoiding defence tax:
Tax residency
Non-domicile

24. EXAMPLE Tax resident Domicile Non- Domicile Income € Salary 26.000
Dividends
Rent
12.000
Interest
5.000
Total Income
Income tax
3.600
Defence tax
27.270 -
Total tax
30.870
Effective tax rate
16%
1.87%