2026 Update
This historical article describes rules that applied before the Cyprus Tax Reform effective from 1 January 2026. Under the revised 60-day rule, being tax resident in another country does not automatically prevent Cyprus residence, although dual residence may need to be resolved under the applicable double tax treaty.
For qualifying first employment commencing under the current regimes, the 50% exemption generally applies where annual remuneration exceeds EUR 55,000 and can continue for up to 17 years, while the separate 20% exemption is capped at EUR 8,550 per year and can generally apply for seven years. Each relief is subject to its own eligibility conditions.
Under the current foreign-pension option, the first EUR 5,000 per year is exempt and the excess is taxed at 5%, unless taxation under the ordinary income-tax bands produces a lower liability.
The Non-Domicile (Non-Dom) Tax Status
The Cyprus non-domicile regime allows qualifying tax residents to receive dividend and interest income free of Special Defence Contribution. The 60-day scheme, in particular, offers a strategic advantage for internationally mobile individuals seeking to optimise their tax position while establishing a genuine link with Cyprus.
The 183-Day Rule
As a general rule under the Income Tax Legislation, an individual may be considered a tax resident in Cyprus if physically present in Cyprus for a period exceeding, in aggregate, 183 days during a tax year (1 January to 31 December).
The 60-Day Rule
As of 1 January 2017, the tax residency rules were amended so that an individual who does not reside in any other country for more than 183 days in aggregate in the same year, and is not a tax resident elsewhere for that year, is classified as a Cyprus tax resident provided all of the following conditions are met:
- The individual stays in Cyprus for a period of at least 60 days
- The individual carries on a business, is employed by a Cyprus company, or holds an office with a Cyprus tax-resident company during the same calendar year
- The individual maintains a permanent residence in Cyprus, whether owned or rented
Loss of Residency
Where an individual meets all of the above conditions, they may nevertheless be treated as non-tax-resident if, during that year, the exercise of any business or employment, or the holding of an office, is terminated.
Exemption from Special Defence Contribution
An individual who satisfies the residency conditions above and is treated as a non-domiciled tax resident, under either the 183-day or 60-day rule, is exempt from Special Defence Contribution (SDC).
SDC is imposed on dividend and interest income earned by individuals who are tax resident and domiciled in Cyprus. From 1 January 2026, the standard rate is 5% on dividends (transitional rules may apply a 17% rate to dividends from profits generated up to and including the 2025 tax year) and 17% on ordinary interest. Rental income is no longer subject to SDC from 1 January 2026. Non-domiciled tax residents are exempt from SDC on dividend and interest income. GeSY/GHS contributions may apply to this income for domiciled and Non-Dom residents alike, subject to the annual contribution cap.
Meaning of Domicile
The legislation defines domicile in accordance with the Wills and Succession Legislation as either domicile of origin (received at birth) or domicile of choice (a domicile acquired as a permanent home for an indefinite stay). A person with a domicile of origin in Cyprus is treated as domiciled for SDC purposes, with the exception of:
- An individual who has obtained and maintained a domicile of choice outside the Republic, provided they were not a tax resident in the Republic for at least 20 consecutive years prior to the tax year in question
- An individual who was not a Cyprus tax resident for at least 20 consecutive years immediately prior to the entry into force of the provisions (i.e. prior to 16 July 2015)
- Irrespective of domicile of origin, an individual who remains a Cyprus tax resident for at least 17 out of the last 20 years prior to the tax year in question is deemed domiciled for SDC purposes
Reliefs on Expatriate Employment Income
Individuals based overseas who were not Cyprus tax residents before commencing employment in Cyprus may be entitled to one of the following exemptions:
- 50% exemption: individuals taking up employment in Cyprus with annual income of EUR 100,000 are exempt from income tax on 50% of that income for 10 years, starting from the year of employment
- 20% exemption: individuals taking up employment in Cyprus who were not previously tax residents are exempt from tax on 20% of their income, or EUR 8,550 (whichever is lower), for five years commencing 1 January of the year following commencement of employment
- Overseas pensions: exempt from tax up to EUR 3,420 and taxed at a 5% flat rate thereafter, with the option to be taxed under normal income tax rates where that produces a higher liability
How ASC Can Help
ASC advises individuals on establishing Cyprus tax residency and securing non-domiciled status, including planning around the 60-day rule, the SDC exemptions and expatriate employment reliefs. Contact us to navigate the nuances of Cyprus tax law and structure your position with confidence.