Special Defence Contribution-Special Defence Contribution-【移投策】

Special Defence Contribution

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2017-12-12


As from the 15th of July 2015, individuals not domiciled in Cyprus but being tax residents only are exempted from paying Special Defence Contribution on dividend, interest and rental income and this would be the case regardless of the origin of such income and the place that is invested. However in order for an individual to comply with the requirements of having a non-domicile status and being therefore to claim exemption from Special Defence Contribution, he or she must fall within one of the three categories as described in Article 2(3) of the relevant Law. That is, in spite the fact that an individual has his domicile of origin in Cyprus, i.e. the place of his birth is Cyprus, according to the provisions of the Wills and Succession Law, Chapter 195:

(i)he/she maintains a domicile of choice in a country other than Cyprus, according to the Wills and Succession Law, and he has not been a tax resident in Cyprus for any period of at least 20 consecutive years preceding the tax year in question; or

(ii)he/she has not been a tax resident in Cyprus for at least 20 consecutive years before the present Law came into force, i.e. he has not been a tax resident from 1995 to 2014, both years inclusive.

(iii)Despite the fact that an individual does not have his domicile of origin in Cyprus, namely he is domiciled abroad; he has not been a tax resident in Cyprus for at least 17 years out of the last 20 years prior to the tax year in question.

The Tax Department of Cyprus has issued relevant Tax Forms and has established a procedure to enable Cyprus tax resident individuals to apply for the non-domicile status and to qualify accordingly. The relevant forms include form as to the Declaration of the Individual for Exemption as non-domiciled, which is a Questionnaire to determine Domicile of Origin and another form which is a Questionnaire to determine Domicile of Choice. In addition to the forms, certain supporting documents are also requested as evidence. The place to submit the relevant forms and documentation is the Returns Administrations section of the local Tax Department district office where the individual’s tax file is maintained. As regards the time for submission, that is during the first year in which the applicant acquires income from dividends, interest or rent for which he wishes to claim exemption from Special Contribution for the Defence Fund. In relation to individuals falling in category (i) above, the relevant forms and documents must be re-submitted every 3 years.

Additionally, according to Article 3(11) of the Law if a person who is domiciled in Cyprus and therefore is subject to Special Defence Contribution transfers his assets to a person who is considered not domiciled in the Republic and thus not being subject to Special Defence Contribution and the former has up to a third degree relationship to the latter, and the Tax Commissioner is of the opinion that the main reason or one of the main reasons of such transfer was to avoid payment of Special Defence Contribution, any income that derives from such assets will be subject to Special Defence Contribution that will be deducted either from the new holder of the assets or from the previous owners of the assets.



For further information on this topic please contact

Ms. Nada Starovlah (nstarovlah@pittaslegal.com) at SOTERIS PITTAS & CO LLC,

by telephone (+357 25 028460) or by fax (+357 25 028461)



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