Concept
Cyprus is an EU member state that assembled its regime for mobile high-net-worth individuals long ago. It rests on two pillars: non-dom status and the 60-day rule. A non-dom (a resident without Cypriot domicile) pays 0% on dividends and interest; the 60-day rule opens tax residency without living on the island for half the year. After the United Kingdom wound down its own non-dom in 2025, Cyprus remained one of the few EU jurisdictions with a long window of zero tax on passive income.
Key parameters of the regime:
| Parameter | Value |
|---|---|
| 60-day rule | At least 60 days in Cyprus, no more than 183 days in any other single state in the tax year |
| 60-day rule conditions | Permanent home in Cyprus (owned or rented); business, employment or office with a Cypriot tax resident |
| 2026 reform | Condition of not being tax resident of another country removed from the law |
| SDC for a domiciled resident | 5% on dividends and 17% on interest |
| SDC for non-dom | 0% on dividends and interest, regardless of source |
| Non-dom term | 17 years (17 of the last 20); then ordinary SDC or flat contribution under article 3Δ |
| GeSY | 2.65% on dividends, interest and rent; income ceiling €180,000 (max ≈€4,770/year) |
Where the Regime Came From
Cyprus built its tax showcase step by step. After the 2013 banking crisis the island set about attracting capital and residents: in 2015 it introduced non-dom status with zero SDC on dividends and interest, in 2017 the 60-day rule for frequent travellers, and in 2022 incentives for new high-earning employees. The 2026 reform reshuffled rates and thresholds, kept both pillars, and added a paid alternative for those who hit the seventeen-year boundary: a flat defence contribution in place of one computed on income.
Tax Residency: 183 Days or 60 Days
Cyprus offers two tax residency tests.
The standard rule is more than 183 days in a calendar year.
The 60-day rule lets a person become a resident by spending at least 60 days in Cyprus, provided no more than 183 days were spent in any other single state in the same tax year and three conditions are met cumulatively: a permanent home in Cyprus, owned or rented; a business carried on in Cyprus, employment in Cyprus, or an office held with a person who is a Cypriot tax resident. The former condition of "not being a tax resident of another country" was removed from the law by the 2026 reform.
The Cyprus connection must hold for the whole year: if the business, employment or office is terminated during the year, the condition fails and the 60-day test does not operate. The day of arrival counts as a day in Cyprus, the day of departure as a day outside. A conflict with another country's residency is settled through the treaty (DTT) tie-breaker.
What Non-Dom Status Provides
A resident not domiciled in Cyprus is exempt from the Special Defence Contribution (SDC). The Special Contribution for the Defence Law treats an individual as a "resident of the Republic" only if that person is a tax resident under the Income Tax Law and in addition has domicile in Cyprus — the whole regime rests on that definition. For a domiciled resident, SDC is 5% on dividends and 17% on interest; a non-dom pays under neither line. That is where "0% on passive income" comes from.
- 0% on dividends and interest — regardless of source — for 17 years (the non-dom rule: 17 of the last 20 years); after that, either SDC in the ordinary way or the flat contribution under article 3Δ;
- capital gains: tax only on Cypriot real estate; foreign capital gains — 0%;
- salary and other income — ordinary progressive income tax (up to 35%, with a tax-free allowance); for new residents with high employment income there is a 50% exemption;
- GeSY contribution (for healthcare) 2.65% on dividends/interest/rent, with an income ceiling of €180,000 (max. ≈€4,770/year) — this is the effective "price" for non-doms on dividends up to the ceiling.
The 2026 Reform
The reform was carried by two statutes: the Income Tax (Amending) (No. 4) Law of 2025, Law 244(I)/2025, and the Special Contribution for the Defence of the Republic (Amending) (No. 4) Law of 2025, Law 245(I)/2025. Both were published in the Official Gazette of the Republic of Cyprus, Annex I(I), No. 5070 of 31 December 2025, and both took effect on 1 January 2026. Neither touched the core of non-dom: SDC is still borne only by someone who is both resident and domiciled.
Salary and other ordinarily taxable income remain subject to progressive income tax, with a €22,000 tax-free band and a 35% top rate from 2026. The 15% corporate rate belongs to the company and does not change the individual’s non-dom exemption. The complete rate table and the rules for corporate loss carry-forward and group relief are set out in the 2026 tax reform.
On the defence contribution, the rate on dividends for a domiciled resident was cut from 17% to 5%. The rate on interest is unchanged at 17%, with a reduced 3% for government and listed debt securities and a right to a refund down to 3% where total annual income does not exceed €12,000. SDC on rent was abolished. A new line appeared: a disguised dividend distribution — where a shareholder uses company assets — is charged at 10%.
The transition on accumulated profits matters more in practice than the rates themselves. Dividends paid out of profits of tax years up to and including 2025 carry SDC at 17% for six years from 1 January 2026. The 5% rate applies to profits earned from 2026 onwards. Anyone distributing accumulated reserves pays at the old rate, which makes the year in which the profit was earned a parameter of the distribution decision.
Deemed dividend distribution was wound down with a transition. The 70% rule is retained for profits of tax years 2024 and 2025: two years after the end of the relevant year, 70% of profits net of corporate tax are treated as distributed, with SDC at 17%. On a liquidation, the profits of the last five years, to the extent earned up to and including tax year 2025, are likewise treated as distributed at 17%. The rule does not apply to profits earned from 2026. Both limbs reach only profits attributable to a person who, at the date of the deemed distribution, was resident and domiciled — a non-dom stays outside the perimeter.
Crypto-assets received a rate of their own. New article 20Ε charges gains on the disposal of crypto-assets at 8%; "crypto-assets" take the meaning in article 3(1)(5) of Regulation (EU) 2023/1114 (MiCA), and disposal covers sale, gift, exchange of one crypto-asset for another, and use of a crypto-asset as a means of payment. The loss mechanics are tight: a loss on the disposal of crypto-assets may be set off only against gains on the disposal of crypto-assets arising in the same tax year, is not carried forward, and is not surrendered within a group. Disposal of crypto-assets obtained through mining falls outside article 20Ε and is taxed in the ordinary way.
Domicile and the 17-Year Rule
Non-dom rests on the distinction between domicile and residence. Domicile of origin is inherited at birth and hard to change: it takes a domicile of choice — relocating with the intention of staying permanently. As long as the domicile of origin remains outside Cyprus, the individual is a resident without Cypriot domicile, and SDC on dividends and interest is zero. But the law treats as domiciled anyone who has been a Cypriot tax resident for 17 of the last 20 years — hence the seventeen-year boundary. More detail is in Domicile, residence and citizenship in succession.
The reform added two refinements. First, a person once deemed domiciled under the 17-of-20 rule is treated as retaining that domicile until completing twenty years during which they were not a Cypriot tax resident — a short absence does not reset the status. Second, for someone whose domicile of origin is outside Cyprus and who has crossed the seventeen-year boundary, an alternative method of paying the contribution became available.
The Flat Contribution under Article 3Δ
The mechanism sits in article 3Δ of the Special Contribution for the Defence Law, inserted by Law 245(I)/2025. The charge is €50,000 a year irrespective of the amount of income. The election is irrevocable and binding for five consecutive tax years, and it may be used for no more than two such five-year periods. The application is filed with the Tax Department on the prescribed form by 30 June of the first year of the period, and once it has been accepted the whole amount — €250,000 for the five years — is paid in a single instalment by the end of the month following the month of acceptance.
The conditions are strict throughout. Missing the payment voids the election: the article does not apply for any year of the period, and the contribution is computed on income in the ordinary way. What is paid is not set off against other tax liabilities or credit balances and is not refunded on any ground, and no foreign tax credit is allowed against it. The zero rate does not come back: the contribution is payable, its amount is simply detached from income, and payment discharges the SDC obligation for all five years.
Immigration: Residence Permits and Permanent Residency
- Permanent residency through investment: purchase of real estate from €300,000 (plus VAT) — fast-track permanent residence permit with confirmed foreign income;
- employment and business routes, company registration;
- Cyprus is an EU member but not part of Schengen.
Scenarios
Holding company and dividends. For someone who lives on dividends or interest, non-dom gives 0% SDC (plus GeSY up to the ceiling). It is often paired with a Cyprus holding company or a wider holding structure: the company distributes dividends to the non-dom individual without SDC, while at the company level EU directives and the treaty network apply.
Mobile entrepreneur. The 60-day rule suits those who don't want to be tied to 183 days but are ready to create real ties.
Family with multiple residencies. Cyprus as a tax home for passive income while maintaining business in other jurisdictions.
Transparency: A Zero Rate Is Not Invisibility
A zero defence contribution removes nothing from automatic exchange. A Cypriot resident's accounts travel under CRS, and from 2026 crypto joins them: under DAC8, crypto-asset service providers collect data from 1 January 2026, with the first exchange within the EU due by 30 September 2027. Outside the EU, Cyprus sits in the second CARF wave — on the Global Forum commitment list in its edition of 14 September 2026, collection runs from 2027 and the first exchange falls due by 2028. DAC8 itself was not transposed on time: on 30 January 2026 the Commission sent a letter of formal notice, with a separate one on DAC9. The domestic timetable lags the European one, but that does not lift a provider's obligation to collect and transmit the data.
Rulings are a separate line. DAC8 brought rulings that determine whether a person is resident for tax purposes in a member state expressly within the definition of an advance cross-border ruling. There is no retrospective reach: the exchange covers rulings issued, amended or renewed after 1 January 2026. A confirmation obtained earlier and simply left to run stays outside the perimeter until it is renewed or amended. Once that happens, a residence ruling is exchanged whatever the amount — the EUR 1 500 000 threshold bites only where the ruling states the amount of a transaction. A client on a special regime usually holds such an advance agreement, and from the first renewal onwards it is visible to the tax administrations of every interested jurisdiction at once.
Risks
Cyprus remains a place where 0% on passive income combines with EU membership and predictable law. The 2026 reform confirmed this: thresholds shifted, non-dom and the 60-day rule are intact, and those who hit 17 years now have a paid option — a flat contribution in place of one computed on income. Neighbouring regimes — the Greek non-dom at €100,000 a year or the Spanish Beckham Law — solve similar problems in their own way, and the choice comes down to income structure and relocation plans. Cypriot non-dom sits on one grid with seventeen other regimes in special tax regimes, where the worked example on €2,000,000 of passive income shows the GeSY ceiling at work (about €4,770 against €100,000 in Greece and €300,000 in Italy); the €300,000 property route to permanent residence is compared with the other European investor routes in investor routes in Europe.
Q/A
What is the tax on dividends for non-doms?
0% SDC. In practice, only the GeSY contribution of 2.65% remains, with an income ceiling of €180,000 (max. ≈€4,770 per year).
How many years does non-dom status last?
17 years. After that a domiciled resident pays SDC in the ordinary way — 5% on dividends and 17% on interest — or elects the flat €50,000 a year under article 3Δ: €250,000 in a single instalment for five years, two five-year periods at most.
Are dividends out of pre-reform accumulated profits taxed at 5%?
No. Dividends out of profits of tax years up to and including 2025 carry SDC at 17% for six years from 1 January 2026. The 5% rate applies to profits earned from 2026 onwards. It makes no difference to a non-dom, who pays SDC at neither rate.
How is crypto taxed?
8% on gains from the disposal of crypto-assets under article 20Ε — sale, gift, exchange for another crypto-asset, or payment in crypto. A loss may be set off only against crypto gains of the same year; it is not carried forward and not surrendered within a group. Disposal of mined crypto-assets falls outside the article.
What is the 60-day rule?
Tax residency is open on 60 days in Cyprus where there is a permanent home and a business, employment or office in Cyprus and no more than 183 days in any other single state; the condition of not being a tax resident of another country was abolished from 2026.
Is it necessary to buy real estate?
For non-dom — no. For fast-track permanent residency through investment — from €300,000 in real estate. These are different things: tax status and immigration status.