Circular 2/2026 - Extension Of The Non-dom Regime

As per the recent amendments to Cyprus tax legislation, as part of the Cyprus Tax Reform (for a comprehensive overview of the main provisions, you can access our report hereopens in a new tab), an alternative method of taxation in respect of Special Defence Contribution (“SDC”) has been introduced, in line with Article 3D of the Special Contribution for the Defence of the Republic of Cyprus Law of 2022, as amended (“SDC Law”), with effect from 1 January 2026. This regime allows eligible individuals to extend their non-dom status in Cyprus, for a maximum of two additional five-year periods (i.e. 5 + 5 years).
 

Individuals electing to extend their non-dom status as per the provisions of this regime, will be required to pay an upfront lump sum of €250.000, for each five-year period.  It is important to note that this election is irrevocable and under no circumstances, will the Tax Department refund the €250.000 lump-sum payment.
 

It is highlighted that the extension of the non-dom regime is available only to individuals who do not have a domicile of origin in Cyprus and are considered as deemed domiciled in Cyprus, in accordance with the provisions of Article 2(3) of the SDC Law.

The Tax Department issued on 29 May 2026 Circular 2/2026, providing clarifications on the following key aspects:

1. The individuals eligible to apply for extension of the non-dom status.
2. The procedure to be followed for applying for extension of the non-dom status.
3. Practical considerations regarding the payment of the required lump-sum amount.
4. The application form to be completed by individuals.

You can access the Circular issued by the Tax Department hereopens in a new tab.

It is important to note that the Circular further clarifies that individuals who became deemed domiciled in Cyprus in the 2024, 2025, or 2026 tax years, may apply for the extension of their non-dom status in Cyprus under this regime, by 30 June 2026.

KPMG in Cyprus observation

This is a positive development, as the Circular issued by the Tax Department provides practical guidance on the application of this alternative method of taxation for SDC, for the extension of the non-dom status of eligible taxpayers. The Circular clarifies the eligibility criteria, application procedure and relevant deadlines for eligible individuals wishing to extent their non-dom status in Cyprus.

It is important to note that an extensive range of practical examples are also included in the Circular, covering all key aspects of the regime and illustrating its application across a wide range of scenarios.

Moreover, the Circular provides key considerations for eligible individuals who may benefit from this regime, enabling them to make an informed decision on whether to enrol in the regime and to understand the procedure that must be followed.

Taking into consideration that the submission deadline for enrollment in this regime, for taxpayers who became deemed domiciled in Cyprus in 2024, 2025 and 2026, is 30 June 2026, eligible individuals wishing to benefit from this alternative method of taxation should proceed with the submission of their application to the Tax Department as soon as possible.

How can KPMG assist?

Our dedicated tax team can assist you in understanding and assessing how the provisions of this alternative method of taxation for SDC, in respect of the extension of the non-dom status, may affect you and/or your employees and/or shareholders, taking into consideration the relevant Circular issued by the Tax Department.

In addition, we can provide guidance and assistance in the preparation and submission of the relevant application form to the Tax Department.

If any assistance or further clarifications are required in relation to this matter, please do not hesitate to contact us.