Domicile in Special Defence Contribuition

This special tax may apply only to tax residents of Cyprus and is imposed on:-

  • Interest;
  • Dividend; and
  • Rental income;

In 2015 the notion of Domicile was introduced into the Special Defence Contribution Tax. With this introduction Cyprus tax resident individuals are classified either as Resident and Domiciled in Cyprus or as Resident but not Domiciled in Cyprus. The term “Domiciled in Cyprus” is defined as an individual who has a Domicile of Origin, in accordance with the Wills and Succession Law, in Cyprus but it does not include:

i. An individual who has obtained and maintains a Domicile of Choice outside Cyprus in accordance with the Wills and Succession Law, provided that the individual was not a Cyprus tax resident for a period of 20 consequtive years preceding the tax year under examination.

ii. An individual who has not been a Cyprus tax resident for a period of at least 20 consequtive years before the commencement of the law.
Physical person who is considered as Cyprus tax resident as defined by the Income Tax Law for at least 17 years from the last 20 years before the year of assessment is considered as

“Domiciled in Cyprus” for SDCT purposes and will therefore be subject to the relevant taxation if and when this condition will be met.

i) Cyprus “domiciled” tax resident individuals

Such physical person will be subject to SDCT. The tax rates are as follows:

  • Dividends 17%;
  • Passive interest 30%;
  • Trading Interest – Nil; this type of interest is liable to income tax at the above indicated rates mentioned in section C.
  • Rental income 3% on the 75% of the total rental income.

Tax credit relief is granted if on the particular income, taxation has already been paid abroad provided that the taxpayer provides the tax authorities with the original tax receipts.

ii) Cyprus “non domiciled” tax resident individuals

Such physical person will be EXEMPTED from Special Defence Tax. Therefore dividend, interest and rental income received will be exempted from taxation.

Important note: This article has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice from a qualified accountant.

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