The end of the UK non-domicile regime: Cyprus is the compelling alternative
The United Kingdom is set to eliminate the Non-Dom Regime; therefore, it is an opportune moment to consider Cyprus.
The Elimination of Non-Dom Status in the UK and Its Consequences.
The UK government announced on 30 October 2024 that the non-dom regime will be abolished, with the change taking effect on 6 April 2025.
This change will bring an end to the existing taxation rules for individuals who are not domiciled in the UK. Consequently, the principle of domicile as a key factor in the UK tax framework will be replaced by a system focused on tax residence.
This development has prompted many high-net-worth individuals to seek new strategies for wealth preservation, tax optimization, and asset protection.
Historically, the UK non-dom status has permitted foreign nationals and UK residents without UK domicile to enjoy tax exemptions on foreign income, as long as that income comes from abroad.
However, the discontinuation of the non-dom regime will eliminate substantial tax relief on income, capital gains, and inheritance for those holding non-dom status.
In light of these changes, many are exploring alternative jurisdictions that can provide similar benefits, with Cyprus emerging as a particularly appealing option.
Benefits of the Cyprus Non-Dom Tax Regime
Cyprus presents a viable alternative with its unique non-dom status.
For individuals from both the EU and non-EU countries, Cyprus serves as an attractive option for both long-term and short-term residency. This appeal largely stems from the non-dom status, which is automatically granted to foreigners who establish tax residency in Cyprus. Notably, this non-dom status can be maintained for a maximum of 17 years.
It is important to highlight that non-dom tax residents in Cyprus enjoy specific exemptions from Cypriot taxation on dividends and interest, irrespective of their source or whether the funds are brought into Cyprus. Furthermore, there is a complete tax exemption on profits derived from the sale of shares and other investment products classified as “securities,” as well as on capital gains that are not associated with real estate situated in Cyprus.
Tax incentives are especially appealing to high net worth individual and following the recent UK decisions those who are non-UK domiciled can take substantial advantage of these tax exemptions, given that a significant portion of their income typically comes from dividends, interest, and rental income.
Acquiring Non-Dom Status in Cyprus
1.Establish Tax Residency in Cyprus: You must either reside in Cyprus for a minimum of 183 days each year or meet the criteria of the 60-day residency rule, which includes conditions like owning a business in Cyprus and not living in any other country for 183 days.
2.The requirements for qualifying as a tax resident with Non-Dom status are outlined as follows:
A) The individual must not possess a domicile of origin in Cyprus.
B) The individual must not have been a tax resident of Cyprus for any period during the 20 consecutive years leading up to the relevant tax year.
C) The individual must not have been classified as a tax resident of Cyprus under the Income Tax Law for a continuous period of 20 years prior to the enactment of the law (i.e., before 16 July 2015).
For detailed information, feel free to contact our legal department.
