Cyprus Non-Dom Status y el impuesto alemán sobre sucesiones: Cómo ahorrar un 40% en impuestos sobre el patrimonio familiar – Planificación sucesoria internacional optimizada

The Problem with German Inheritance Tax: Why Family Wealth is at Risk

Before we get to the solution, we need to understand the problem. German inheritance tax is among the highest worldwide.

The Current Tax Rates: A Reality Check

Here are the bare numbers for German inheritance tax (as of 2025):

A Practical Example

Let’s take Thomas, 52 years old, a successful entrepreneur with 15 million euros in assets. He wants to transfer his wealth to his two children.

German inheritance tax:

• Tax-free allowance per child: €400,000
• Taxable assets: €15 million – €800,000 = €14.2 million
• Tax rate: 27% (up to €26 million)
• Tax burden: €3.834 million

That means over a quarter of his life’s work goes to the state. And that’s after he’s paid taxes all his life already.

Why Classic Structures Often Fail

I often hear: “Richard, what about a family foundation or lifetime gifts?”

The truth is: These tools have their place. But they have their limits, too:

• Family foundations are subject to inheritance substitute tax every 30 years
• Lifetime gifts work only for small amounts and over long periods
• Business succession privileges are tied to strict requirements

And, the basic problem remains: You’re still subject to German tax law.

This is where the Cyprus Non-Dom Status comes in.

Cyprus Non-Dom Status: Your Key to Tax-Free Inheritance

The Cyprus Non-Dom Status (Non-Domiciled Status) is a special tax regime for people who live in Cyprus but are not “domiciled” there.

What does “Non-Domiciled” Actually Mean?

Domicile is a legal term describing your permanent centre of life. Unlike residence, domicile is about your long-term intent to stay at a particular place.

In Cyprus, you can be considered Non-Dom if:

• You were not born in Cyprus
• You were not resident in Cyprus in the 20 years before entry
• You do not intend to remain permanently in Cyprus

The Tax Benefits at a Glance

As a Cyprus Non-Dom, you enjoy exceptional tax privileges:

1. No inheritance tax in Cyprus on worldwide assets
2. No gift tax in Cyprus
3. No taxation of foreign dividends (if not remitted to Cyprus)
4. No taxation of foreign interest income
5. 17 years of Non-Dom Status possible (until 2041 for new arrivals)

The Secret: Cyprus’ Domicile Concept

This is where it gets interesting. Cyprus makes a distinction between three categories:

This means: You can live in Cyprus for 17 years, remain an EU citizen, and still pay no inheritance tax.

Why Cyprus is Particularly Attractive as an EU Member

Cyprus offers a crucial advantage over other tax havens:

• EU Membership: Free movement, no visa issues
• Legal certainty: European legal system
• Double taxation agreements with over 60 countries
• Stable political situation
• Developed infrastructure and financial services

To be clear: Cyprus is not a Caribbean tax haven. It’s a serious EU location with real substance requirements.

And that’s exactly what makes it so valuable.

How to Save 40% Inheritance Tax with Cyprus Non-Dom: Concrete Numbers

Let’s get specific. I’ll show you with real numbers how the savings work.

Case Study: The Schmidt Family – €20 Million Wealth

Initial situation:

• Assets: €20 million
• 2 children
• Previous residence: Germany
• New residence: Cyprus (Non-Dom Status)

Scenario 1: Inheritance from Germany

German inheritance tax calculation:

• Exemptions (2x €400,000): €800,000
• Taxable assets: €19.2 million
• Tax rate: 27%
• Tax burden: €5.184 million

Scenario 2: Inheritance from Cyprus (Non-Dom)

Cypriot inheritance tax:

• Tax rate for Non-Doms: 0%
• Tax burden: 0 euros

Savings: €5.184 million

The Math for Different Asset Sizes

But Wait – What about the Costs?

Of course, there are costs for moving to Cyprus. Let’s be honest:

One-off costs:

• Legal fees for residency: €15,000 – €25,000
• Real estate purchase or rent: From €300,000 or €2,000/month
• Tax advice and structuring: €20,000 – €50,000

Ongoing costs:

• Living costs in Cyprus: About 30% lower than in Germany
• Annual compliance costs: €5,000 – €10,000

Even conservatively calculated, the costs pay off from as little as €2–3 million in assets.

The Time Factor: When Do You Need to Act?

This is crucial: You must act before the inheritance event.

The German tax office checks closely:

• How long were you resident in Cyprus?
• Was the move tax-motivated?
• Did you build real substance in Cyprus?

My recommendation: You should move at least 5 years before the planned transfer of assets.

Why? This creates clear evidence and dispels doubts about your intent.

Requirements for Cyprus Non-Dom Status: What You Need to Fulfill

Let’s get practical. Cyprus Non-Dom Status is not automatic. You need to meet certain conditions.

The Legal Requirements in Detail

1. Fulfil Non-Domicile Criteria:

• Not born in Cyprus
• Not resident in Cyprus during the 20 years prior to entry
• No intention of permanent stay in Cyprus

2. Acquire Tax Residency:

• At least 60 days of physical presence in Cyprus
• No tax residency in another country
• Business activity in Cyprus or employment at a Cypriot company
• Available residence in Cyprus

The 60-Day Rule: Your Key to Tax Residency

In 2017, Cyprus introduced a revolutionary rule. You can become tax resident with only 60 days of physical presence.

Additional requirements:

1. You are not tax resident in any other country for more than 183 days
2. You have a business activity in Cyprus
3. You have an available residence in Cyprus

Concretely, this means: You can travel or spend up to 305 days a year in Germany and still be a Cyprus tax resident.

Substance Requirements: What the Tax Authority Expects

This is a sensitive point. The German tax office only accepts the relocation if you build real substance in Cyprus.

Minimum substance:

• Own or rented apartment in Cyprus
• Cypriot bank account
• Business activity or employment in Cyprus
• Social contacts and activities

Optimal substance:

• Property ownership in Cyprus
• Local company with real business activity
• Local employees
• Memberships in clubs or associations
• Children in local schools

Documentation Requirement

I can’t stress this enough: Document everything!

Keep a detailed diary of:

• Days spent in different countries
• Business activities in Cyprus
• Social activities and contacts
• All evidence of your centre of life

Why? In an audit by the German tax office, you have to prove that your move was genuine.

Observe Time Limits

The Non-Dom Status is not available indefinitely:

That means: If you act now, you’ll have Non-Dom Status until at least 2042. That’s a window of almost 20 years.

More than enough for most succession plans.

Step-by-Step: How to Implement Your Cyprus Strategy

Theory is great, but you want to know: How do I actually do it?

Here’s my proven roadmap that I’ve implemented with dozens of clients.

Phase 1: Preparation and Analysis (3–6 months)

Step 1: Individual Analysis

• Analyze asset structure
• Evaluate tax position
• Consider family circumstances
• Set timeline

Step 2: Legal Review

• Check Non-Dom eligibility
• Calculate German exit tax
• Clarify corporate law issues
• Prepare family agreements

Step 3: Structural Planning

• Design optimal corporate structure
• Develop real estate strategy
• Plan banking structure
• Conceive business activity in Cyprus

Phase 2: Implementation in Germany (2–4 months)

Step 4: Prepare for Deregistration in Germany

• Transfer or restructure company shares
• Optimize exit tax
• Plan or request tax audit
• Fulfill reporting obligations

Step 5: Practical Preparations

• Terminate or rent out German apartment
• Adjust insurances
• Regulate bank accounts
• Move personal belongings

Phase 3: Set-up in Cyprus (6–12 months)

Step 6: Establish Residency

• Buy or rent property
• Apply for MEU1 (Immigration registration)
• Apply for tax residency
• Confirm Non-Dom status

Step 7: Build Business Activity

• Set up Cypriot company
• Open bank account
• Develop initial business activity
• Build substance

Step 8: Integration and Compliance

• Make social contacts
• Club memberships
• Ongoing tax returns
• Document presence

Critical Success Factors

From my experience, Cyprus strategies usually fail due to these points:

1. Insufficient substance – you must truly live and work
2. Lack of documentation – every day must be traceable
3. Planning too late – 5 years lead-time is optimal
4. Missing local expertise – you need Cypriot lawyers and tax advisors

Cost Overview for Implementation

For most clients, the invested capital pays off in the very first year after the inheritance event.

The question isn’t whether you can afford the implementation. The real question is whether you can afford not to.

Pitfalls and Risks: What You Absolutely Must Watch Out For

I wouldn’t be a serious advisor if I showed you only the sunny side. Let’s honestly talk about risks.

The Biggest Risk: Fake Foreign Entity

The German tax office is not naive. If you only move to Cyprus on paper, it’ll get expensive.

Warning signs for the tax office:

• Less than 183 days’ real presence in Cyprus
• No genuine business activity on the ground
• Centre of life effectively still in Germany
• Family and friends remain in Germany
• No integration into the local community

The consequence? The tax office still treats you as a German tax resident. Then you pay double: German taxes plus Cypriot compliance costs.

Risk Number 2: Changes in Law

Tax laws change. That’s a fact.

Current developments to watch:

• EU minimum tax: 15% for large corporations (not yet affecting individuals)
• ATAD guidelines: Tightening of anti-abuse rules
• Transparency initiative: More reporting obligations for tax structures

My assessment: The Non-Dom Status in Cyprus will remain for the medium term. The EU has tacitly given its approval. But adjustments are possible.

Personal and Family Challenges

Often underestimated: human factors.

Common problems:

• Partner doesn’t want to move to Cyprus
• Children should stay in German schools
• Business partners don’t accept the move
• Cultural adaptation is difficult
• Language barrier (Greek/Turkish)

My advice: Try living there first. Spend several months in Cyprus before taking the final step.

The Compliance Risk

Cyprus has strict reporting requirements. Omissions can be costly.

Important deadlines:

• Tax return: July 31 of the following year
• Corporate tax return: March 31 of the following year
• Beneficial Ownership Register: Ongoing updates
• Transfer Pricing Documentation: For larger transactions

Miss a deadline and you face fines from €100 to €20,000 plus interest.

The Exit Tax Risk on Company Shares

If you own over 1% of German company shares, moving out triggers a notional sale.

Example Calculation:

• Company shares worth €10 million
• Original purchase price: €1 million
• Theoretical gain: €9 million
• Exit tax (26.375%): €2.374 million

The good news: You can defer the tax as long as you remain an EU resident. In Cyprus you later pay 0% capital gains tax as a Non-Dom.

Reputation Risk and Social Acceptance

Lets be honest: Tax-saving foreign structures have an image problem.

Questions that may arise:

• Is this fair to society?
• What do business partners and clients think?
• How do I explain this to my family?
• How does this affect my personal environment?

My answer: You’re using fully legal opportunities under EU law. Just like companies putting trademarks in the Netherlands or basing holdings in Luxembourg.

Tax avoidance is legal. Tax evasion is illegal.

The difference is crucial.

Cyprus vs. Other Options: The Honest Comparison

Cyprus isn’t the only option for international tax planning. Let’s honestly assess the alternatives.

Switzerland: The Classic with Pitfalls

Switzerland long held its reputation as the ultimate tax haven. Today the reality is more complex.

Switzerland’s advantages:

• Lump-sum taxation for foreigners possible
• Political stability and legal certainty
• High quality of life
• Strong financial services

Switzerland’s disadvantages:

• High cost of living (about 60% above EU level)
• Lump-sum taxation gradually being abolished
• Complicated naturalization
• Limited EU integration

Malta: The EU Competitor

Malta offers similar advantages to Cyprus, but with its own specifics.

Malta Non-Dom Program:

• No taxation of foreign income (if not brought into Malta)
• Inheritance tax only on Maltese assets
• EU membership with all benefits
• English-speaking environment

Why I still prefer Cyprus:

• Malta is very small and crowded
• Higher cost of living
• Less developed infrastructure
• Limited business opportunities

Portugal: The Newcomer with Potential

Portugal has caught up enormously in recent years, especially with the NHR (Non-Habitual Resident) program.

Portugal NHR advantages:

• 10 years tax exemption on foreign income
• Attractive flat tax for certain professions
• High quality of life
• Relatively simple residence acquisition

The decisive disadvantage:

• Inheritance tax still applies (Stamp Duty: 10%)
• NHR expires after 10 years
• More complex tax planning required

Dubai/UAE: The Tax Haven with Hurdles

Dubai attracts with 0% income tax and 9% corporate tax from 2023.

Why Dubai isn’t for everyone:

• Minimum presence of 180 days required
• Cultural adaptation necessary
• Limited EU benefits
• Inheritance law according to Sharia (for Muslims)
• High cost of living

Monaco: For the Ultra-Wealthy

Monaco remains the tax haven for the super-rich.

Why Monaco only works for a few:

• Property prices: €100,000+ per square meter
• Proof of €500,000+ bank balance required
• Very limited business opportunities
• Possible social isolation

My Conclusion: Why Cyprus Offers the Optimal Balance

After 15 years in international tax advice my view is clear:

Cyprus offers the best combination of:

1. Tax benefits – 0% inheritance tax for Non-Doms
2. EU benefits – Full mobility and legal certainty
3. Quality of life – Mediterranean climate, low costs
4. Practicality – Easy to obtain residence
5. Flexibility – Only 60 days of presence required

For assets between 3 and 50 million euros, Cyprus is in my experience the optimal solution.

Above that, Monaco becomes interesting. Below, simpler solutions are often sufficient.

Your Next Step Toward an Optimal Tax Succession Plan

Let me summarize what weve discussed:

The Cyprus Non-Dom Status can save you hundreds of thousands to millions in inheritance tax for larger fortunes. The structure is legal, EU-compliant, and can be implemented in practice.

But – and this is important – it’s not suitable for everyone.

Who Cyprus is Worthwhile For: The Checklist

Ideal candidates for Cyprus Non-Dom Status:

• Assets over 3 million euros
• International business possible
• Flexibility regarding place of residence
• Family is mobile or already grown
• Willingness to build real substance
• Long-term planning (5+ years before inheritance)

When you should not do it:

• Assets below 2 million euros
• Strong local business ties in Germany
• Family absolutely wants to stay in Germany
• No willingness for genuine relocation
• Short-term planning (less than 2 years)

Avoid the Three Most Common Mistakes

From my practice, I see the same stumbling blocks again and again:

1. Starting too late – tax planning needs time
2. Underestimating substance – the tax office checks closely
3. Not involving the family – the best tax plan is worthless without family harmony

Your Concrete Action Plan

If, after reading this article, you think Cyprus could be interesting for you, here’s what to do:

Phase 1: Initial Analysis (next 4 weeks)

1. List your asset structure
2. Calculate German inheritance tax
3. Assess family situation
4. Arrange an initial consultation

Phase 2: Detailed Planning (2–3 months)

1. Contact a Cypriot lawyer
2. Check Non-Dom eligibility
3. Plan a trial stay in Cyprus
4. Develop corporate structure

Phase 3: Decision (4–6 months)

1. Involve family finally
2. Inform business partners
3. Finalize detailed planning
4. Start implementation

Set Realistic Expectations

Finally, let me be honest with you:

The Cyprus Non-Dom Status is a powerful tool. But it’s not magic and not a shortcut to a carefree life.

You must:

• Invest time and money
• Adapt your lifestyle
• Maintain ongoing compliance
• Keep up with legal changes

In return, you get:

• Massive tax savings on inheritance
• EU-wide flexibility
• Attractive lifestyle
• Future-proof structure

The decision is yours.

If you have more questions or want individual advice, you know where to find me.

Until then: Think internationally, act smart.

Yours, RMS

Frequently Asked Questions about Cyprus Non-Dom Status

How long does it take to get Cyprus Non-Dom Status?

You can acquire tax residency after just 60 days of physical presence. Non-Dom status is automatically recognised if you fulfil the requirements (not born in Cyprus, not resident in the previous 20 years). Complete implementation typically takes 6–12 months.

What happens after 17 years, when Non-Dom Status expires?

After 17 years, you are automatically “domiciled” and subject to Cyprus’ full taxation. However, you then have three options: 1) Stay in Cyprus and pay regular taxes, 2) Move on to another country, or 3) Your succession plan is already complete.

Can I still own German real estate as a Cyprus Non-Dom?

Yes, you can keep any German property. This will still be subject to German inheritance tax. This is why restructuring via Cypriot companies is often useful to benefit from tax advantages here, too.

How does the German tax office behave when moving to Cyprus?

The German tax office checks closely whether the move is for real. Key are real substance in Cyprus, actual physical presence, and a convincing business activity. With correct implementation, the tax office will accept the relocation.

What’s the minimum investment required for a Cyprus strategy?

Overall costs are about €100,000–€200,000 in the first two years (including property/renting, advice, company costs). This investment pays for itself with as little as €2–3 million in assets through the tax savings.

Is Cyprus Non-Dom Status compliant with EU law?

Yes, the Non-Dom status is fully EU-compliant. Cyprus uses a similar system as the United Kingdom (pre-Brexit). The European Commission has no objections to this regulation, since it is based on domicile, not nationality.

Can I keep my German passport?

Yes, you can keep your German passport. You don’t need Cypriot citizenship for Non-Dom Status, just tax residency. Germany generally allows dual citizenship with EU countries.

What happens in a tax audit in Germany?

If you have properly moved and built real substance in Cyprus, the German tax office cannot dispute your move. What’s crucial is complete documentation of your presence and business activity in Cyprus.

What role does family play in the decision?

Family is crucial. If spouse or children don’t want to move, the strategy will be hard to implement. The German tax office regards family bonds as an indicator for the real centre of life. An open family discussion is essential.

Are there sectors or business models that are particularly suitable?

Especially suitable are location-independent business models: Online business, consulting, investments, trading, IT services. It’s more difficult for location-bound activities such as crafts, retail, or personal services.