The non-domiciled rule was introduced by the Government of the Republic of Cyprus to attract start-ups to establish in Cyprus, encourage headquarters to relocate to Cyprus, and incentivize corporate executives and high-net-worth individuals to take up residency in the country.

The Special Contribution for Defense Law (hereinafter referred to as “the SDC Law”) imposes tax on the worldwide income of Cyprus tax residents arising from dividends, interest and rent.

An individual is considered domiciled in Cyprus if they have:

1. 1. Cyprus domicile of origin; or
   2. Acquired the Cyprus domicile (domicile of choice).

Despite that the term “Cyprus Domicile” is used in the SDC Law as a tax liability defining factor the concept of “Cyprus Domicile” is defined in the Wills and Succession Law Cap. 195.

In accordance with the Wills and Succession Law:

1. An individual may at any time can hold only one being either the domicile which he acquired at birth due to the domicile of his father.
2. A person may acquire a domicile of choice with his permanent establishment in a country with the intention to remain at the country perpetually.
3. A domicile of choice is maintained until it is abandoned, in which case a new domicile of choice is acquired, or the domicile of origin is reinstated.

For the purposes of the SDC Law, an individual with domicile of origin in Cyprus may still be considered not domiciled in Cyprus if:

1. They have obtained a domicile of choice in another country and were not a tax resident of Cyprus for at least 20 years before the tax year in which they became a tax resident of Cyprus.
2. They have not been a tax resident of Cyprus for a period of 20 years prior to the introduction of the amendment to the SDC Law.

Notwithstanding the above, an individual who has been a tax resident of Cyprus for at least 17 years out of the last 20 years prior to the tax year will be considered to be “domiciled in Cyprus” and as such will be subject to special contribution for defence starting from the 18th year.

How to apply

The Tax Department of Cyprus requires evidence showing that the individual did not have Cyprus domicile for the last 20 years.

(a) To demonstrate the domicile of origin:

1. 1. Birth certificate of the applicant;
   2. Birth certificate of the parents of the applicant;
   3. Documents proving the place and period of the permanent residency of the parents of the applicant (e.g., passports, certificates of residency, or employment documents at the time of the applicant’s birth; and
   4. Any other document(s) proving the domicile of origin.

(b) To demonstrate:

A. Domicile of choice; or

B. Deemed non-Cyprus domicile for the purposes of SDC Law due to being non-Cyprus tax resident for 20 consecutive years; and

C. Deemed non-Cyprus domicile for the purposes of SDC Law due to being non Cyprus tax resident for a period of 17 years out of the last 20 years. 

1. 1. Certificates and/or other documents from foreign tax authorities;
   2. Certificates and/or other documents from foreign local authorities;
   3. Documents and account statements from utility service providers (telephony, electricity, etc) from foreign countries;
   4. Employment documents in foreign country and certificates of payments of social insurance contributions in that country;
   5. Documents and certificates that prove the period of residency in Cyprus as above (the above list is not exhaustive).

This note is intended to provide general information on the subject and does not constitute legal advice. For further information on the subject and for specific legal advice please contact us.