Cyprus Non-Dom Status and the Special Defence Contribution (SDC)
Updated for the 2026 tax framework
To strengthen Cyprus as an international business and financial centre while keeping its tax framework competitive, the House of Representatives passed a series of new laws on 16 July 2015. One of the most important changes was the introduction of the “non-domicile” (non-dom) status, which grants tax exemptions on dividends and interest for qualifying individuals. Non-doms are also not subject to the Special Defence Contribution (SDC), which makes Cyprus an attractive base for internationally mobile individuals.
Key point: Non-dom status exempts qualifying individuals from SDC on dividends and interest. Since 1 January 2026, rental income is no longer subject to SDC for any taxpayer.
What the SDC Covers
The SDC Law imposes tax on certain categories of income, namely interest, rents and dividends, received by persons who are Cyprus tax residents, subject to any available exemptions. It also includes provisions for the deemed distribution of profits of Cypriot tax resident companies, to the extent that their shareholders are Cypriot tax residents.
An individual is a Cyprus tax resident if they are physically present in Cyprus for a period or periods exceeding 183 days in aggregate during the calendar year.
Tax Residence vs. Domicile
Since the 2015 amendments, an individual is subject to SDC only if they are both a Cyprus tax resident and domiciled in Cyprus. Being resident for tax purposes does not, on its own, make someone domiciled.
For SDC purposes, “domiciled in Cyprus” means an individual with a Cypriot domicile of origin under the Wills and Succession Law. It does not include:
- An individual who has acquired and maintained a domicile of choice outside Cyprus under the Wills and Succession Law, provided they have not been a Cyprus tax resident for 20 consecutive years preceding the tax year; or
- An individual who has not been a Cyprus tax resident for 20 consecutive years before the introduction of the law.
The 17-out-of-20-year rule
An individual who has been a Cyprus tax resident for at least 17 of the last 20 years before the tax year is considered domiciled in Cyprus and is subject to SDC, regardless of their domicile of origin. Non-dom status therefore applies for a limited period.
What Changed in 2026
- Lower SDC on dividends for domiciled residents: the rate fell from 17% to 5% on dividends paid out of profits generated from 1 January 2026.
- No SDC on rental income: rental income is no longer subject to SDC from 1 January 2026.
- Non-dom exemption preserved: qualifying non-doms remain exempt from SDC on dividends and interest.
- New extension option: individuals who become deemed domiciled may, in certain cases, elect a fixed SDC payment (reported as €250,000 per five-year period, subject to approval) in place of ordinary SDC. Eligibility and deadlines should be confirmed against Tax Circular 02/2026.
At a Glance
| Income type | Non-dom (Cyprus tax resident) | Domiciled (Cyprus tax resident) |
|---|---|---|
| Dividends | Exempt from SDC | 5% SDC (from 2026) |
| Interest | Exempt from SDC | SDC applies |
| Rental income | No SDC (from 2026) | No SDC (from 2026) |
Planning to relocate to Cyprus?
Your residence history, domicile of origin and income sources all affect your position. Tax rules change frequently, so contact our team for a personalised review before making decisions.
This article is for general information only and does not constitute tax or legal advice.