How is a foreign pension taxed in Cyprus?

You can elect a flat 5% on the pension income above €5,000 per year (the first €5,000 is tax-free), or the normal progressive rates, whichever is lower, chosen each year.

Do I have to live in Cyprus all year to be tax resident?

No. Under the 60-day rule you can be Cyprus tax resident with as few as 60 days in Cyprus, provided you are not tax resident elsewhere, do not spend more than 183 days in any other single country, and you maintain a permanent home in Cyprus together with a Cyprus tie such as business, employment or an office.

As a non-dom, is my investment income taxed in Cyprus?

Non-domiciled residents are exempt from Special Defence Contribution on dividends and interest for up to 17 years. After that, individuals without a Cyprus domicile of origin can elect to pay a fixed €250,000 to extend the exemption for a further five years (up to two periods). We review your full situation.

Special Defense Contribution

Individuals

Individuals who are Cyprus tax resident and Cyprus domiciled are liable to Special Defence Contribution (SDC) on dividends and interest. Non-domiciled residents are exempt from SDC. The rates below reflect the 2026 tax reform.

Dividends: SDC on dividends is 5% for profits earned from 1 January 2026 (reduced from 17% under the 2026 reform). Dividends paid out of profits earned up to 31 December 2025 remain subject to 17% if received on or before 31 December 2031. Non-domiciled individuals are exempt.

Interest income: SDC of 17% is payable on interest income of Cyprus tax resident and domiciled individuals. A reduced rate of 3% applies to interest from certain sources, including:

Cyprus Government saving bonds and development stocks
Approved provident funds and Social Insurance Fund
Interest earned by individuals whose total income (including interest) does not exceed €12,000

Payment: SDC on Cyprus-source dividends and interest is withheld at source and paid by the end of the month following the month of payment. SDC on foreign-source dividends and interest (received gross, with no Cyprus withholding) is paid by self-assessment in two six-month instalments,by 30 June and 31 December each year.

Rental income: From 1 January 2026, rental income is no longer subject to SDC (previously 3% on 75% of gross rents). Rental income remains subject to income tax.

Legal entities

Cyprus tax resident entities are subject to SDC on dividends, interest income and rental income.

Dividends:

Dividends paid by one Cyprus tax resident company to another are not subject to SDC.
Dividends received by a Cyprus tax resident company from a non-resident company are exempt from SDC provided that the non-resident company engages directly or indirectly by less than 50% in activities which lead to investment income, and the foreign tax burden on the dividends paid by the earning company is not substantially lower than the Cyprus tax burden (i.e. at least 7.5%).

Dividends not covered by the above exemptions are subject to SDC at 5% (for profits earned from 1 January 2026; 17% for profits earned up to 31 December 2025, transitional).

Deemed dividend distribution (DDD):

The DDD rules are abolished for profits earned from 1 January 2026. For earlier years, transitional rules apply; 70% of after-tax profits are deemed distributed and subject to 17% SDC (for Cyprus tax resident and domiciled shareholders only): 2023 profits deemed distributed on 31/12/2025, 2024 profits on 31/12/2026, and 2025 profits on 31/12/2027. Non-domiciled and non-resident shareholders are not affected.

Interest income: Following the 2026 reform, interest income of Cyprus tax resident companies is subject only to corporate income tax (15%) and is no longer subject to SDC. Interest from the ordinary carrying on of a business (banking, financing, leasing, group financing, etc.) is treated as business profit subject to income tax.

Rental income: From 1 January 2026, rental income is no longer subject to SDC; it is subject to corporate income tax only.