Cyprus Non-Dom Regime: 0% Tax on Dividends with EU Membership

Cyprus offers a combination that is nearly unique in the European Union: a 12.5% corporate tax rate, 0% tax on dividends for Non-Domiciled residents, and 0% capital gains tax on securities. For founders structuring a holding company within the EU, Cyprus is the structural centerpiece.

The Non-Domicile Status

Under the 2015 Non-Domicile rules, individuals who become Cyprus tax residents but are not “domiciled” in Cyprus are exempt from:

• Special Defence Contribution (SDC) — normally 17% on dividends, 30% on interest
• This effectively means 0% tax on dividend income and 0% on interest income

You qualify as Non-Domiciled if:

• You were not born in Cyprus, OR
• You were not a Cyprus tax resident for 17 of the last 20 years

The Non-Dom status lasts for 17 years from the date you become a Cyprus tax resident.

The Corporate Structure

A Cyprus private company (Ltd) pays:

• 12.5% corporate tax on net profits
• 0% withholding tax on dividends paid to Non-Dom shareholders
• 0% capital gains tax on disposal of shares/securities

Example structure:

1. Incorporate a Cyprus Ltd
2. Route foreign consulting/SaaS revenue through the company
3. Pay 12.5% corporate tax on profits
4. Distribute remaining profits as dividends to yourself: 0% tax
5. Effective total tax rate: 12.5%

The 60-Day Tax Residency Rule

Cyprus has a uniquely favorable tax residency test. You can become a Cyprus tax resident by spending just 60 days in Cyprus (instead of the standard 183 days), provided you:

• Do not spend more than 183 days in any other single country
• Have a permanent residence in Cyprus (owned or rented)
• Carry on business or are employed in Cyprus
• Are not tax resident in any other country

This is the lightest physical presence requirement for tax residency in the EU.

The Application Process

1. Establish a Cyprus address — rental or purchase
2. Apply for a Tax Identification Code (TIC) at the Tax Department
3. Register your company at the Department of Registrar of Companies
4. Open corporate and personal bank accounts — Bank of Cyprus, Hellenic Bank
5. File annual tax returns confirming Non-Dom status

The IP Box Regime

Cyprus also offers an IP Box regime with an effective tax rate of 2.5% on qualifying IP income. For SaaS companies, this can reduce the effective corporate rate dramatically if the IP is developed and owned by the Cyprus entity.