Cyprus non-dom status and what changed with the 2026 reform

The Cyprus non-domicile regime has been one of the main reasons entrepreneurs, investors and senior professionals relocate to the island. It exempts qualifying tax residents from the Special Defence Contribution (SDC), which otherwise applies to dividends and interest. The tax reform enacted in December 2025 kept the regime in place but changed the surrounding landscape, lowering some SDC rates for domiciled residents and removing rental income from SDC altogether. As of October 2026 the regime remains a meaningful planning tool, though its relative advantage has narrowed for some types of income.

Non-dom status depends first on tax residence, explained in our guide to the 183-day and 60-day rules. Immigration routes for people relocating are covered in our article on Cyprus permanent residency.

What the Special Defence Contribution covers

SDC is a separate tax from income tax. For individuals who are tax resident and domiciled in Cyprus, the Tax Department’s guidance states that dividends are subject to SDC at 5% and interest at 17%, regardless of where the income arises. Dividends and interest are exempt from income tax for individuals, so SDC is often the only Cyprus tax on this income.

A tax resident who is not domiciled in Cyprus is exempt from SDC. In practice, a non-dom can receive dividends and interest without Cyprus tax, although foreign withholding taxes may still apply at source.

How domicile is defined

For SDC purposes, domicile follows the Wills and Succession Law. It covers a domicile of origin, received at birth, and a domicile of choice, acquired by establishing a home with the intention of permanent or indefinite residence.

A person with a domicile of origin in Cyprus is treated as domiciled, unless they have acquired and kept a domicile of choice abroad and were not Cyprus tax resident for at least 20 consecutive years before the tax year, or were not Cyprus tax resident for at least 20 consecutive years before 16 July 2015.

The deemed domicile rule

Regardless of domicile of origin, a person who has been Cyprus tax resident for at least 17 of the 20 years before the tax year is deemed domiciled for SDC purposes. For most new arrivals, this means non-dom treatment can last up to 17 years.

The extension option

Recent amendments to the SDC Law introduced an alternative for people who become deemed domiciled and wish to keep non-dom treatment. They may extend it for up to two additional five-year periods by paying an upfront lump sum of €250,000 for each period. According to the Tax Department, the payment extinguishes the SDC liability on dividend and interest income from Cyprus and abroad during the period, irrespective of the amount of income.

Shareholders receiving dividends through a Cyprus company should also read our guide on setting up a company in Cyprus.

What changed with the 2026 reform

The reform enacted in December 2025, effective largely from 1 January 2026, changed several elements that interact with the regime.

• Rental income is no longer subject to SDC, so non-dom status no longer makes a difference for rents.
• The SDC rate on dividends for domiciled residents is 5%, as published by the Tax Department.
• Deemed dividend distribution rules were abolished for profits generated after 31 December 2025, while new constructive dividend rules apply to tax resident and domiciled shareholders.
• Personal income tax bands were revised, with the tax-free threshold raised to €22,000.

The effect is that the gap between domiciled and non-domiciled residents has narrowed for dividend income but remains substantial for interest. Our corporate services overview covers how holding structures are often reviewed after such changes.

For a structured overview of the practical steps, our tax registration and filing page sets out how registration and annual returns are handled.

Practical steps

Non-dom status is claimed through the tax return and supported by evidence of domicile. Relocating individuals usually prepare a declaration of domicile with supporting documents, such as birth records and evidence of previous residence. Tax residence itself must first be established under the 183-day or 60-day rule.

If you would like to talk through how these rules might apply to your own circumstances, our team would be glad to help. You can call +357 979 42 388 or write to us through our contact page.

Sources

• Tax Department, Tax residency and domicile, as of October 2026.
• Tax Department, Tax Reform 2026, posted 29 May 2026.
• Ministry of Finance, Tax incentives, as of October 2026.

This article is for general information only and does not constitute legal, tax or investment advice. Figures are stated as of 2026 and may change; confirm current requirements with the relevant authority and an independent adviser before acting. AT Express is a private consultancy and is not affiliated with any government or official programme.

Featured image: “Desktop with laptop and calculator (Unsplash)” by Unknown author (Unsplash), via Wikimedia Commons, CC0 (public domain dedication).