Cyprus has long been regarded as an attractive investment destination for high-net-worth individuals (HNWIs) from across the globe. The island's unique position at the crossroads of Europe, Asia, and Africa, combined with its stable legal framework, favourable tax regime and high-quality lifestyle, make it an ideal place for individuals and businesses to thrive. Among the various advantages offered by Cyprus, the non-domiciled (non-dom) tax regime stands out as a powerful tool that provides HNWIs with an opportunity to optimise their wealth and minimise their tax liabilities. In this article, we explore why Cyprus is the ideal choice for non-doms, investors and entrepreneurs, as well as the many benefits of living, working, and doing business in this Mediterranean island.
Cyprus as an Investment Hub
Cyprus has consistently been one of the most attractive locations for investment in the Mediterranean region. The island has a robust, open economy that encourages entrepreneurship, international trade and cross-border business activity. Cyprus' strategic location, in close proximity to major markets in Europe, the Middle East and Africa, allows businesses to easily access these regions and benefit from Cyprus' status as a member of the European Union (EU).
Additionally, Cyprus is known for its business-friendly environment, which includes:
Competitive Tax System: Cyprus boasts one of the lowest corporate tax rates in the EU at 12.5%, making it a popular choice for businesses seeking to minimise tax burdens. Furthermore, there are several tax incentives for international businesses, such as exemptions on dividends, interest income, and capital gains under certain conditions.
Bilateral Tax Treaties: Cyprus has a network of over 60 double taxation treaties with countries around the world, ensuring that income is not taxed twice. This network facilitates cross-border business and investments by providing favorable tax treatment for foreign investors.
Ease of Doing Business: The island's modern infrastructure, advanced telecommunications and a transparent legal system make it an appealing destination for businesses. The country's legal framework follows the English common law system, providing a familiar and reliable structure for international investors.
EU Member Benefits: As a member of the European Union, Cyprus offers businesses access to the EU single market, allowing them to operate seamlessly across EU member states. This provides great opportunities for international expansion and trade.
Growing Technology and Innovation Sector: Cyprus has invested heavily in developing its tech and innovation sectors. Numerous fintech, software and digital companies have set up operations in Cyprus, attracted by the skilled workforce, competitive costs, and favourable regulatory environment.
The Non-Dom Tax Regime: An Attractive Advantage
Cyprus is particularly appealing to non-domiciled individuals, and one of the key reasons for this is its non-dom tax regime. The regime offers a range of tax exemptions and benefits for individuals who are not considered to be domiciled in Cyprus. This tax structure is part of Cyprus' broader effort to attract wealthy individuals to the island and it has been instrumental in positioning Cyprus as a top destination for HNWIs and their families from around the world.
What Does It Mean to Be a Non-Dom in Cyprus?
In Cyprus, an individual is considered to be "domiciled" in the country if they have a permanent home in Cyprus or if they have established a close connection to the island. A non-domiciled individual, on the other hand, does not have such a connection and is, therefore, subject to the favourable tax rules available to non-doms.
Cyprus' non-dom tax regime is designed to appeal to individuals who are looking to reduce their tax liabilities while enjoying all the benefits of living and working in an EU member state. The regime has been structured to ensure that non-doms can take advantage of a low-tax environment without the burdens of higher taxes that are often associated with other jurisdictions.
Key Benefits of the Non-Dom Tax Regime
Exemption from Tax on Worldwide Dividends: One of the standout features of Cyprus' non-dom tax regime is the complete exemption from tax on dividends received from abroad. Non-doms are not subject to income tax on foreign dividends, allowing them to maximise their global investment income without paying excessive taxes. This is a significant advantage for individuals with international investments and wealth.
Exemption from Tax on Interest Income: Another major advantage is the exemption from tax on interest income. Non-domiciled individuals do not pay tax on interest earned from foreign sources. This makes Cyprus an attractive place for those who receive income from investments such as bonds, savings accounts, or other forms of interest-bearing assets.
No Capital Gains Tax on the Sale of Securities: Cyprus also offers a tax-free capital gains regime on the sale of securities, including shares, bonds and other investment assets. Non-doms who sell securities are not subject to capital gains tax, which can result in significant savings when liquidating investments.
Attractive Personal Income Tax Rates: Cyprus' income tax rates for residents are relatively low compared to many other European countries. In addition to the exemptions mentioned above, individuals who are non-doms benefit from a progressive tax rate system where income is taxed at rates ranging from 20% to 35%, depending on the level of earnings.
No Inheritance Tax: Cyprus does not impose inheritance tax on estates, which makes it particularly attractive for individuals seeking to pass on wealth to their heirs. This is an important consideration for HNWIs who want to ensure that their family members are not burdened by high inheritance taxes.
No Wealth Tax: Cyprus does not impose a wealth tax, meaning that individuals are not taxed on the value of their assets. This allows non-doms to retain more of their wealth without having to worry about annual wealth taxes.
30% Tax Exemption for New Residents: For individuals who relocate to Cyprus and establish residency, there is a 30% exemption on salary income for up to 17 years, provided certain conditions are met. This is particularly attractive for expatriates and professionals moving to Cyprus to live and work.
No Exit Tax: Cyprus does not impose an exit tax on individuals leaving the country, which provides flexibility for those who may decide to relocate in the future.
The Cyprus Lifestyle: A Draw for Non-Doms and Families
Aside from the tax benefits, Cyprus offers an exceptional quality of life, making it an ideal destination for families and individuals alike. The island is known for its pleasant Mediterranean climate, pristine beaches and welcoming local culture, making it a great place to live and raise a family. Some of the factors that contribute to Cyprus' attractiveness as a residence for non-doms include:
Safety and Stability: Cyprus has a low crime rate and is considered one of the safest countries in Europe. The island's stable political environment and well-developed legal system also offer security to investors and families.
High-Quality Healthcare: Cyprus boasts an excellent healthcare system with both public and private options. Many private hospitals offer world-class facilities, and the healthcare professionals in Cyprus are highly trained and internationally qualified.
World-Class Education: Cyprus is home to many international schools and universities, offering high-standard education to children of expatriates. For families with children, Cyprus provides a great opportunity for world-class education in both English and other languages.
Leisure and Lifestyle: From world-renowned beaches to a thriving food scene, Cyprus offers a laid-back lifestyle with plenty of opportunities for outdoor activities. Residents enjoy access to some of the best golf courses, hiking trails and water sports facilities in the Mediterranean. Cyprus' rich history and culture also provide a fascinating backdrop to daily life, with numerous archaeological sites, museums, and traditional festivals to explore.
Property Investment: Cyprus' real estate market offers a variety of investment opportunities, from luxury villas and seaside apartments to commercial properties. The island’s property market has shown resilience and growth, offering HNWIs the opportunity to diversify their investment portfolios.
Cyprus as the Ideal Destination for Non-Doms and HNWIs
Cyprus’ non-dom tax regime, combined with its favourable business environment and exceptional quality of life, makes it an attractive destination for high-net-worth individuals and their families. The tax exemptions on dividends, interest income, and capital gains, along with the absence of inheritance and wealth taxes, allow non-doms to preserve and grow their wealth in a low-tax environment.
With its strategic location, competitive tax system, and the lifestyle benefits it offers, Cyprus continues to be a top choice for global investors, entrepreneurs, and families seeking to relocate to a dynamic, welcoming, and prosperous environment.
For those looking to invest, work, or live in a tax-efficient manner, Cyprus presents a unique opportunity that should not be overlooked. Whether it is for tax benefits, business opportunities, or lifestyle considerations, Cyprus remains one of the most attractive jurisdictions for non-doms and HNWIs worldwide.
Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For specific legal guidance on Cyprus legal matters, it is advisable to consult with a qualified legal professional. If you have any questions or require any legal advice or assistance, please do not hesitate to contact us at contact@kourtellos.com.