Non-dom status, and what the 2026 reform changed

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.

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.

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 that same dividend and interest income, on the terms set out below. 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 healthcare contribution, and the ceiling most people meet in the wrong order

The defence contribution is not the only charge that reaches a dividend. Section 19(1)(ζ) of Law 89(I)/2001 puts a contribution of 2.65 per cent on the income of a person who has income, and section 2 defines that income as an individual's income from the sources set out in section 5 of the Income Tax Law other than earnings or a pension, expressly including dividends as the defence contribution law defines them. Non-dom status does nothing to that charge. It is a different law, with a different test, and it does not ask where you are domiciled.

What it does have is a ceiling. Where the total of a contributor's earnings, pensions and income exceeds 180,000 euros, the contribution is payable on 180,000 euros only. The order in which that total is built up is set out in the section and is the part worth knowing: earnings first, then pensions, and income last. A director drawing a salary and taking dividends therefore fills the ceiling with the salary before the dividends are reached, and the dividends sitting above it carry no contribution at all. The same dividends, taken by someone with no earnings, carry 2.65 per cent from the first euro.

Two further points sit in the same section. Where a contribution has been paid on an amount above the ceiling it can be reclaimed from the Organisation on application, and for a contribution year beginning on or after 1 January 2025 the excess is refunded by the Tax Commissioner under the Assessment and Collection of Taxes Law. And no contribution is payable more than six years after the end of the contribution period it relates to, unless it was lost through fraud or wilful default.

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 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.