Cyprus taxes through a company and non-dom status: the four-step structure and the honest 2026 arithmetic

A short guide to paying less tax in Cyprus keeps circulating on social media: open a Cyprus company, pay 15% on profits, obtain non-dom status and take dividends free of Defence Contribution. The structure is legal and it works — thousands of relocated business owners use it. But four steps leave out the conditions that decide whether it works for you.

The structure in four steps

• A Cyprus company (Ltd). The business runs through a company resident in Cyprus.
• 15% corporate tax. From 1 January 2026 the rate rose from 12.5% to 15% as part of the reform that aligned Cyprus with the OECD global minimum tax.
• Non-dom status. The owner becomes a Cyprus tax resident without being domiciled there.
• Dividends without SDC. A non-dom is exempt from the Special Defence Contribution on dividends, interest and rent.

What the 2026 reform changed

The key change is not the higher company rate but the narrower gap between non-doms and everyone else. Before 2026 a Cyprus-domiciled resident paid 17% Defence Contribution on dividends, and non-dom status saved exactly those 17%. For domiciled residents the rate is now 5%. The non-dom exemption remains, but it is worth 5% of the dividend rather than 17%.

The second change: deemed dividend distribution was abolished for profits earned from 2026. A company that paid no dividends for two years used to be taxed as if it had distributed 70% of its profit. Profit can now stay in the company without that charge.

The arithmetic on €100,000 of profit

	Non-dom	Domiciled resident
Company profit	€100,000	€100,000
Corporate tax 15%	−€15,000	−€15,000
Dividend to the owner	€85,000	€85,000
Defence Contribution (SDC)	€0	−€4,250 (5%)
GESY contribution 2.65%	−€2,252	−€2,252
Net to the owner	€82,748	€78,498
Total burden	≈17.3%	≈21.5%

The line missing from the popular guide is the contribution to GESY, the national health system. It is charged on dividends for non-doms too: 2.65%, capped at €180,000 of annual income. So "0% on dividends" is true only of the Defence Contribution — the real burden on a non-dom's profit is about 17%, not 15%.

17 years — and after

Non-dom status holds as long as the person has not been a Cyprus tax resident for 17 of the last 20 years. In practice that is up to 17 years of relief from the move. The 2026 reform added a paid extension: two further five-year periods at a €250,000 lump sum each. For most business owners it makes no sense — the extension pays for itself only on dividends of several million euros over five years.

Where the structure stops working

• You have to actually become a Cyprus tax resident. Either 183 days a year on the island, or the 60-day rule: not resident anywhere else and not more than 183 days in any other country, a home in Cyprus, and work, a business or a directorship in a Cyprus company.
• The company needs real substance. Management and decisions in Cyprus: a director, an office, people. A company with a nominee director gets treated as resident by other countries' tax authorities, and banks simply will not open its account.
• Your previous country of residence does not go away. If you remain its tax resident, the Cyprus company becomes a controlled foreign company there and its profit is taxed there. The structure works after leaving your previous residency, not instead of it.
• Salary is taxed differently. Whatever the owner takes as salary rather than dividend goes through the income tax scale and social insurance, not through this arithmetic.

What follows

The Cyprus structure is still one of the most efficient legal arrangements in the EU: about 17% total burden on the profit the owner takes out. But it is not a tax regime you buy together with a company — it follows from relocating. First you decide where you live, then you set up the company, and only then do you choose a home that fits the 60-day rule.

Compared with Dubai, where individuals pay no tax on dividends at all and UAE corporate tax is 9% on profit above AED 375,000, Cyprus has a different advantage: it is the EU, with its market, its banks and, eventually, its passport. Choosing between them is a question of where you want to live, not only of the rate.

Based on the tax legislation of the Republic of Cyprus as amended by the reform in force from 1 January 2026. This is not tax advice: a structure for a specific situation is worked out with a Cyprus tax adviser and with an adviser in your previous country of residence.