Non-Dom Cyprus – many talk about, not many understand it! And even less people know how to ultimately save taxes on it.
Introduction
In this article, we will discuss everything you need to know about Cyprus before moving there with your business.
We discuss
- The Non-Dom Regime that makes the tax advantages possible
- Prerequisites for the Non-Dome
- Benefits of the Non-Dom Regime and the tax benefits and system
- Company structures foreigners use in Cyprus
- Pros and Cons of Cyprus
- Unlock further tax benefits: How the rich get richer with lower taxes
If you want to understand how entrepreneurs use foreign companies to reduce their corporate tax in Cyprus, feel free to book a call with us and we go into more depth.
Side note:
If you choose Cyprus primarily for its tax benefits, then you may want to reconsider.
There are other places in Asia or even in Euopre (Spain, Portugal) where you can save the same amount of taxes of more.
Further reading:
How to live in Spain and pay almost 0% in taxes as a self-employed
1 – The Non-Dom Regime: Understanding the system
The Non-Dom rule was introduced in 2015.
It gives major tax benefits to foreign entrepreneurs who move to Cyprus.
The tax benefits in short are:
- 12.5% on corporate tax (the lowest in the EU)
- 0% tax on dividends
2 – The Non-Dom Regime: The prerequisites
There are two prerequisites to receive the Non-Dom status:
Prerequisite 1: A Cyprus tax resident
The first prerequisite is to be a Cyprus tax resident.
For this, you have two choices.
- The 180-day-rule: You are living in Cyprus for 180 days per year
- The 60-day-rule: This has a few requirements
- You spend at least 60 days per year in Cyprus
- You are not a tax resident in another country
- You don’t spend more than 180 days in another country
- You have a business, employment or you are a director of a Cyprus business
- You have a rented or purchased apartment in Cyprus
Most foreign entrepreneurs who live in Cyprus are following the 60-day-rule because
- it gives them more flexibility to spend time in other countries, e.g. summer in their home country and winter in South East Asia
- it still gives them the feeling of a base and a home in Cyprus to return whenever they want to, without restrictions
Prerequisite 2: Non-Domiciled status
This prerequisite means, in simple terms:
You have not lived in the last 17 years in Cyprus.
This is the case for most foreigners who move to Cyprus with their business.
This is why it applies to almost all foreigners.
But please note that:
This means after 17 years of living in Cyprus, you no longer have the Non-Domiciled status and you lose all tax benefits.
So if taxes are important to you, take this into consideration and plan accordingly.
3 – Cyprus Non-Dom: The Benefits
The biggest benefits come with tax policies as described above:
- Corporate Tax: 12% which is the lowest in the EU
- Dividend Tax: 0%
Apart from that the usual tax laws apply which mean:
- Capital gains (except for rental income): 0% tax
- Wealth and inheritance tax: 0% tax
- Employment income: 0% tax up until 19,5k Euro and 20 to 30% progressive tax above that
Important note:
For anyone who still applies for Non-Dom now has the guarantee of the tax benefits for 17 years.
But over the past few years, there is more pressure from the EU and the Cyprus government is rethinking of changing the Non-Dom tax system.
So in case you want to use this opportunity, then 2026 may be a good year to start this.
Further reading:
Hong Kong has similar tax-friendly laws for foreigners without even having to live there – read more about Hong Kong tax laws here.
4 – Cyprus setup for foreigners
Most foreigners who come to Cyprus choose the following setup:
They
- open a business in Cyprus
- they pay themselves a very low employment salary (500 to 1000 Euros per month) – this is to be covered under the Cyprus health insurance
- the rest of the business profit, they pay themselves out as dividends with 0% tax.
This way they keep social insurance contributions low through the employment salary where in the same time they are covered by the health insurance.
Once the 12% corporate tax is paid on the business profit, they then pay themselves out the rest as dividends with 0%.
5 – Pros and Cons of Cyprus
Let us start with the Pros.
Pros:
- taxes are low and the lowest in the EU
- If you want to live in the EU and pay low taxes for two decades, then Cyprus may be the best option
- EU member and easier access to your home country if you come from Western Europe
Cons:
- If it is purely for tax benefits, there are other countries that can compete with Cyprus such as Spain, Portugal, Malta (with correct setup, book a call with us to find out more)
- Banking can take time
- Local banks have a deposit guarantee, but in the past the government broke its promise (history repeats itself, so maybe not the best place to build asset)
- You have to stay at least 2 months per year for Non-Dom status (can be frustrating if you don’t like it there)
As a summary:
Cyprus is a great place if you actually want to live there and as a nice add-on it has good tax benefits.
But purely for tax benefits, you can live in other European countries with lower or same tax rates, e.g. Spain with a foreign company in Hong Kong.
6 – Cyprus Non-Dom: Further tax optimization opportunities
Let us now get into a more exciting part:
Everyone knows about Non-Dom already, but things become interesting that most people don’t know.
This is where further tax optimization can be done.
Let us illustrate this with an example of one of our customers Chris from Germany.
Chris’ profile:
- he has a marketing agency and serves German clients
- he lives in Cyprus under the Non-Dom Regime (60-day rule)
- he makes around 200k to 300k per year with his services
- he invoices his clients with his Cyprus firm
- he pays himself a monthly salary of 1000 Euros
- and at the end of the year the company profit is around 200k Euros
Taxes:
- He pays corporate tax around 24k Euros per year
- He is left with 174k Euros per year which he then pays out as dividends
Chris was generally happy with his situation in 2024, but he came to us out of curiosity whether there is a possibility to further reduce his corporate tax liability in Cyprus.
After discussions with a Cyprus CPA, we came up with the company structure for him to fully save 20k of costs (taxes) per year.
Here is a short breakdown:
With our help, Chris opened a Hong Kong (HK) company.
The Hong Kong company has two directors: Chris and a local HK person.
We added a local HK person in order to prevent the Hong Kong company from becoming tax liable in Cyprus.
Due to tax laws in Hong Kong, Chris pays
- 0% in corporate tax in Hong Kong (see offshore tax exemption in Hong Kong)
- 0% in dividend tax in Hong Kong
- 0% in dividend tax in Cyprus
His Cyprus company then basically sends no invoices to his clients anymore and has only two functions:
- to keep his residency in Cyprus
- billing his Hong Kong company 1000 Euros per month to pay his salary and his social contributions
The running cost in Hong Kong for this setup would be around 4k Euros per year.
Comparing this to the previous model where he paid 24k Euros in taxes, we
- reduced the taxes from 24k Euros to almost 1200 Euros (12,5% of 12k Euros profit in Cyprus that is billed to the Hong Kong company)
- have more fixed costs due to the Hong Kong company accountancy and audit
This looks complicated at first, but is a very normal setup for entrepreneurs after a certain net-worth.
The best benefit here is that Chris keeps his money safe in Hong Kong (safer banks, safer banking infrastructure) instead of in Cyprus.
This way, his assets are protected.
If you find this interesting or have more questions, feel free to discuss this further in a video call with out legal experts where we will share a step-by-step roadmap for your case.
