No tax residency elsewhere? Does this mean if I'm a U.S. citizen (and pay taxes) that I wouldn't qualify for this? Or is it just my business that has to be only in Cyprus?
Yes, as a U.S. citizen, you can set up a company in Cyprus and benefit from the country’s low 12.5% corporate tax rate. The company would be taxed in Cyprus, not in the U.S., as long as it's properly structured and managed from outside the U.S.
Now, regarding Cyprus's non-domiciled (non-dom) tax status, this is where it gets a bit more nuanced.
To qualify for non-dom status (which gives you 0% tax on dividends and interest in Cyprus), you first need to become a tax resident of Cyprus.
There are two ways to do that:
183-day rule: Spend more than 183 days in Cyprus in a tax year.
60-day rule (what I did years back): Spend at least 60 days in Cyprus and meet a few conditions, including: Not being a tax resident anywhere else that year, having business or employment in Cyprus, having a permanent home there.
For U.S. citizens, the 60-day route doesn’t work, because you're always considered a tax resident of the U.S., no matter where you live. So if you want to qualify as a Cyprus tax resident (and then apply for non-dom status), you'd need to spend at least 183 days in Cyprus.
Even if you do qualify for non-dom status in Cyprus, it's important to remember: You still have to report everything to the U.S., dividends from your Cyprus company may be tax-free in Cyprus, but they’re taxed in the U.S. as foreign dividends. Salary is also taxed, but you can use the Foreign Earned Income Exclusion or Foreign Tax Credit to reduce or offset your U.S. tax burden
Long story short (I'm getting long winded here, but don't want to give you half-truths):
1. You can benefit from Cyprus’s corporate tax system
2. You can access the non-dom perks if you spend 183+ days there
3. You’ll still owe U.S. tax on personal income (like dividends and salary), even if Cyprus doesn’t tax it (but you can keep the salary low, and pay more dividends, as I understand it, dividend tax is lower than income tax in the US as well)
No tax residency elsewhere? Does this mean if I'm a U.S. citizen (and pay taxes) that I wouldn't qualify for this? Or is it just my business that has to be only in Cyprus?
Great question, and it’s one that comes up a lot.
Yes, as a U.S. citizen, you can set up a company in Cyprus and benefit from the country’s low 12.5% corporate tax rate. The company would be taxed in Cyprus, not in the U.S., as long as it's properly structured and managed from outside the U.S.
Now, regarding Cyprus's non-domiciled (non-dom) tax status, this is where it gets a bit more nuanced.
To qualify for non-dom status (which gives you 0% tax on dividends and interest in Cyprus), you first need to become a tax resident of Cyprus.
There are two ways to do that:
183-day rule: Spend more than 183 days in Cyprus in a tax year.
60-day rule (what I did years back): Spend at least 60 days in Cyprus and meet a few conditions, including: Not being a tax resident anywhere else that year, having business or employment in Cyprus, having a permanent home there.
For U.S. citizens, the 60-day route doesn’t work, because you're always considered a tax resident of the U.S., no matter where you live. So if you want to qualify as a Cyprus tax resident (and then apply for non-dom status), you'd need to spend at least 183 days in Cyprus.
Even if you do qualify for non-dom status in Cyprus, it's important to remember: You still have to report everything to the U.S., dividends from your Cyprus company may be tax-free in Cyprus, but they’re taxed in the U.S. as foreign dividends. Salary is also taxed, but you can use the Foreign Earned Income Exclusion or Foreign Tax Credit to reduce or offset your U.S. tax burden
Long story short (I'm getting long winded here, but don't want to give you half-truths):
1. You can benefit from Cyprus’s corporate tax system
2. You can access the non-dom perks if you spend 183+ days there
3. You’ll still owe U.S. tax on personal income (like dividends and salary), even if Cyprus doesn’t tax it (but you can keep the salary low, and pay more dividends, as I understand it, dividend tax is lower than income tax in the US as well)
Does that help you?
Yes, great. Sounds like you've covered all the bases. Thank you.
very welcome