Cyprus Non-Dom Status and the 2026 Defence Contribution

Resident is one question. Domiciled is another, and it carries the tax

In short

The defence contribution on dividends and interest falls only on residents who are also domiciled in Cyprus.
A resident without Cyprus domicile, the non-dom, is outside it, typically for seventeen years of residence.
From 1 January 2026, Law 245(I)/2025 cut the dividend rate for the domiciled to 5 per cent and took rents out of the contribution altogether.

Cyprus taxes dividend and interest income of individuals not through income tax but through the special contribution for defence, under Law 117(I)/2002. Since amending Law 119(I)/2015, that contribution has applied to an individual only if two things are true at once: the person is a Cyprus tax resident under the Income Tax Law, and the person also has their domicile in Cyprus.

A resident without Cyprus domicile, the non-dom, therefore receives dividends and interest outside the defence contribution. That is the whole attraction of the status, and it is created by statute, not by application or approval: if the definitions fit you, you have it.

The first step

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The definition

Where domicile comes from, and when it changes hands

The defence law borrows its concept of domicile from the Wills and Succession Law, Cap. 195. You have a domicile in Cyprus for defence purposes if you have a Cyprus domicile of origin under that law, broadly, the domicile that attached to you at birth, with two statutory exceptions: a person who has acquired and maintains a domicile of choice outside Cyprus and was a non-resident for at least twenty consecutive years before the tax year, and a person who was a non-resident for at least twenty consecutive years immediately before the non-dom rules came into force in 2015.

Against that sits the deemed domicile rule, and it is the one that sets the clock for newcomers: whatever your domicile of origin, once you have been a Cyprus tax resident for at least seventeen of the last twenty years before the tax year, you are treated as domiciled in Cyprus for defence purposes. In practice a person who moves to Cyprus enjoys non-dom treatment for their first seventeen years of residence, and is deemed domiciled from the eighteenth. Once acquired, deemed domicile is shed only after twenty years of non-residence.

The effect

What the non-dom does not pay, and what everyone still does

For as long as the status holds, the non-dom resident receives dividends and interest without any defence contribution, whether the source is in Cyprus or abroad. The exemption sits in the definition itself: the charging provisions for dividends and interest apply to a person who is "resident in the Republic", and for an individual that now means resident and domiciled together.

Two boundaries are worth stating plainly. First, non-dom status concerns the defence contribution only; it does not remove income tax on income that the Income Tax Law charges, such as employment or business income, and contributions to the General Healthcare System remain payable on income including dividends and interest, with their own rules and their own ceiling. Second, the status follows the definitions year by year: residence in enough earlier years, or the facts of your domicile of origin, can move you across the line without any election or notice.

The 2026 reform

What Law 245(I)/2025 changed on 1 January 2026

The defence contribution was rebuilt by amending Law 245(I)/2025, published on 31 December 2025 and in force from 1 January 2026, as part of the wider tax reform. For individuals who are resident and domiciled, the headline moves are these:

Dividends are now charged at 5 per cent, in place of the previous 17 per cent. A transitional rule keeps 17 per cent for dividends received from Cyprus companies within six years of the law's commencement where they are paid out of profits of tax years up to and including 2025.
The deemed distribution regime is wound down: a Cyprus company is treated as distributing 70 per cent of its accounting profits of the tax years 2024 and 2025 within two years of each year's end, with the contribution at 17 per cent, and the regime does not reach profits of later years.
A disguised distribution rule charges 10 per cent where a company's assets are used privately by a shareholder or a connected person, or passed to them below market value.
Interest for the domiciled remains at 17 per cent, with 3 per cent for savings certificates and development bonds of the Cyprus or another EU government and for listed corporate and public bonds, and a refund down to 3 per cent where total annual income including the interest does not exceed twelve thousand euros.
Rents are out: the contribution on rental income was abolished, and the rent provisions were deleted from the law.

None of this touches the non-dom, whose dividends and interest were outside the contribution before the reform and remain outside it after. What the reform changes is the arithmetic of staying past the seventeenth year: the gap between non-dom and domiciled treatment of new dividends narrowed from 17 points to 5.

The election

The 50,000 euro option for the deemed domiciled

The same law added an alternative for one group: an individual who has no Cyprus domicile of origin but has become deemed domiciled under the seventeen-year rule may elect to pay a flat annual defence contribution of fifty thousand euros, whatever the level of their income, instead of the contribution on their actual dividends and interest.

The terms are strict, and they are in the statute: the election is irrevocable and binds for five consecutive tax years; it is made by application to the Commissioner by 30 June of the first year; the whole five-year amount of two hundred and fifty thousand euros is paid in a single instalment, and missing the payment deadline voids the election for all five years; no foreign tax credit is allowed against it and nothing paid under it is refunded; and a person may use the election for at most two five-year periods. It is a tool for large, steady investment income, and it deserves arithmetic before enthusiasm.

Common questions

Do I need to apply for non-dom status?

No. The status is the product of two statutory definitions, residence under the Income Tax Law and domicile under the defence law. If you are resident without Cyprus domicile, you are outside the charge on dividends and interest without any application. What is worth obtaining is evidence: a written analysis of your position, and where needed a residence certificate, for the paying companies and foreign authorities that ask.

How long does non-dom status last?

Until the definitions catch you. For a newcomer with a foreign domicile of origin, the deemed domicile rule bites once you have been resident for seventeen of the last twenty years, so the eighteenth year of residence is typically the first domiciled one. A Cyprus domicile of origin can put you inside the charge much sooner, subject to the twenty-year exceptions in the law.

What do non-doms pay on dividends, if not the defence contribution?

The defence contribution does not apply, whatever the source country. Contributions to the General Healthcare System remain payable on dividend and interest income under that system's own rules and ceiling, and any foreign withholding tax at source is a matter for the paying country and any treaty.

Did the 2026 reform abolish the deemed distribution rules?

Going forward, yes. Law 245(I)/2025 confines deemed distribution to the accounting profits of 2024 and 2025, deemed distributed as to 70 per cent within two years of each year's end at 17 per cent, and only to the extent the profits are attributable to resident domiciled individuals. Profits of 2026 onwards are not deemed distributed; actual dividends out of them are charged at the new 5 per cent when paid to resident domiciled individuals.

Is the 5 per cent rate available for dividends out of old profits?

Not immediately. Dividends received from Cyprus companies within six years of 1 January 2026, paid out of profits of tax years up to and including 2025, stay at 17 per cent under the transitional rule. The 5 per cent applies to distributions out of the newer profits.

Does the reform change anything for rental income?

Yes, and for everyone: the defence contribution on rents was abolished from 1 January 2026 and the rent provisions were deleted from the law. Rental income remains within income tax under the Income Tax Law.

The 183-Day and 60-Day Rules

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Cyprus International Trusts

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Every reference on this page was read in the primary texts, Law 117(I)/2002 and the amending Laws 119(I)/2015 and 245(I)/2025 as published in the Official Gazette, and is recorded in the register of sources.

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