The UK will abolish the non-dom tax regime starting in April 2025 and replace it with a new residence-based system featuring globally competitive provisions for individuals temporarily residing in the country. This announcement was made by Rachel Reeves, the Chancellor of the Exchequer, during the presentation of the 2025 UK budget.
Reeves stated that UK will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system as of April 2025 and in its place, a residence-based scheme with internationally competitive arrangements for temporary residents while addressing loopholes will be implement.
The abolishment of the non-dom tax regime will result in these individuals seeking new destinations with tax advantages.
Cyprus could be the ideal solution.
Why Cyprus? Overview of Cyprus Non-Domicile Status
The Non-Dom tax regime in Cyprus is designed to attract high-net-worth individuals, entrepreneurs, and international business executives. This regime offers substantial tax benefits by exempting Non-Doms from certain local taxes.
Cyprus has a strategic geographical location in the middle of three continents Asia, Europe and Africa. The third largest island in the Mediterranean Sea, large enough to be called cosmopolitan and small enough to be called the ideal place to raise a family. Cyprus has a rich cultural heritage and patiently awaits to be explored offering a supreme level of quality of life.
Cyprus is considered a business hub with years of experience as an international business centre. Cyprus offers a wide range of highly skilled professionals as well as an investor friendly EU tax scheme and an impartial legal system based on common law principles.
Cypriot economy has faced its own challenges because of the global pandemic, but it has succeeded to complete its own path to a steady and sustainable recovery.
Cyprus has a multicultural population, enjoys a high standard of living and has a very low crime rate. An island that enjoys more than 300 days of sunshine annually, with mild winters and is the proud recipient of 76 Blue Flag beaches per costal line in the world!
How to obtain Cyprus residency
- EU Citizens
For EU Citizens entering the Republic of Cyprus to work and who will spend more than three (3) months on the island will need to register with the relevant authorities in Cyprus for a permanent residence permit for EU citizens. The individual that resides in Cyprus for more than 183 days is considered a Cyprus Tax resident.
- Cyprus company of Foreign interest
The best way is by setting up a Cyprus company of Foreign interest. Cyprus companies with foreign interest are companies duly incorporated in the Republic of Cyprus, with the majority of shares held by non-EU nationals.
Companies of foreign interests must meet the following criteria to be eligible to employ third country nationals in Cyprus:
- Τhe majority of the company’s shares are owned by third-country nationals.
- Τhe ultimate beneficial owner must deposit an amount of €200,000 in an account held by the company in a credit institution licensed by the Central Bank or submit evidence of an investment amounting to €200,000, for the purposes of operating its business in Cyprus (e.g. office purchase, office equipment purchase, etc.).
- To have offices in Cyprus
- Residency by investment
Additionally, as an individual Cyprus residency can also be obtained through residency by investment. The applicant in the case of residency by investment should invest in real estate the amount of 300.000 Euro and to be able to provide evidence of at least 30.000 Euro annual income and additional 5.000 for each dependent family member.
Cyprus Tax residents
An individual is considered tax resident if the meet the 183 day rule which means that a person is present in Cyprus for more than 183 days annually.
For frequent travellers, those who have to travel for business reasons, Cyprus offers the ideal solution of the 60-day rule. The 60-day rule requires five conditions to be met:
- The individual does not reside outside Cyprus for more than 183 days in a year.
- Is not a tax resident of another state.
- Spends at least 60 days a year in Cyprus.
- Is employed in Cyprus and/or holds a managerial position in a company that is tax resident in Cyprus.
- Is the owner or tenant of a residential property in Cyprus.
An individual who is a tax resident of Cyprus pays tax on income derived from sources within and outside the Republic. If an individual is not a tax resident of Cyprus, he pays tax only on domestic income.
Definition of Non-Domiciled Persons
In accordance with the provisions of the Wills and Succession Law, there are two kinds of domicile:
- Domicile of origin: i.e. the domicile received by an individual at birth
- Domicile of choice: i.e. the domicile acquired by an individual by establishing a physical presence in a particular place with the intention to make it the place of permanent residence
Irrespective of the domicile of origin or choice, individuals who have NOT been tax residents in Cyprus for at least 17 out of the last 20 years prior to the tax year in question will be deemed to be NON-DOMICILED in Cyprus for the purposes of the SDC Law (Special Defense Contribution Law).
In the case of persons who have their domicile of origin in Cyprus, they will nevertheless be considered as non-domicile in the following cases:
- If they have acquired and maintained a domicile of choice outside Cyprus, provided that they were not tax residents in Cyprus for any continuous period of at least 20 consecutive years prior to the tax year in question
- If they were not tax residents in Cyprus for a period of at least 20 consecutive years immediately prior to the entry into force of the non-domicile provisions (i.e. prior to 16/07/2015).
Non-domicile status in Cyprus
Non-domicile status in Cyprus offers appealing tax benefits for wealthy individuals and entrepreneurs.
The concept of Non-Domicile resident is that individuals that select Cyprus as their personal tax residence can benefit from tax incentives and advantages for 17 years after moving to the island and obtaining their tax residency status.
One of the most important notes is that Cyprus has double taxation treaties with more than 67 countries which allows for the avoidance of double taxation of income received by individuals in Cyprus and abroad.
The concept of non-domiciliary tax resident was introduced by the Cypriot government to make it attractive for wealthy foreign individuals to invest in the island’s economy. By acquiring this status, you are exempt from paying tax on passive income which concludes to have received dividends and interest income tax free.
Advantages of non-domicile status
Individuals who become Non-Dom in Cyprus can take advantage of the below benefits for a guaranteed period of 17 years from obtaining the Non-Dom status:
- No Tax on Dividend income.
- No taxation on income from Interest or Investments
- 50% personal income tax exemption on employment income over 550.000 Euro, or 20% or Eur 8,550 personal income tax exemption (whichever is lower) on employment income less than 55,000 Euro.
- No defence Contribution (SCD) on Rental Income
- No Remittance based tax.
- No Capital Gains Tax on sale of securities and immovable property (as long as the immovable property is located outside Cyprus)
- No inheritance and gift tax
- Fast-Track Residency with Non-dom status, especially by setting up a local company and obtain the Non-Dom status as an employee of your own company
- 12.5% Corporate Tax
How can TOTALPRO help?
TOTALPRO has significant experience in the immigration programs offered in Cyprus. Our professional team can assist and guide you through in all aspects of your application.
We can act as your single point of contact to set up your business, to help you and your family settle (assist with real estate agents, introduction to schools etc.), direct you to professionals to help you pass the necessary exams, obtain residency permits for you and your family, and comply with all ongoing requirements.
Contact us for a free consultation.