Decision
Is the 250,000 Non-Dom Extension Worth Paying?
Is the 250,000 Non-Dom Extension Worth Paying?: short answer
On dividends alone it breaks even at one million euro a year. The election costs 250,000 for five years, or 50,000 a year, and what it buys is exemption from Special Defence Contribution at 5 percent on dividends and 17 percent on interest. Below that level the charge is cheaper than the election.
Reviewed by Doviandi Limited, licensed by ICPAC as an administrative service provider, certificate E645/F/2014.
| Cost | 250,000 for each five-year period, equivalent to 50,000 a year |
|---|---|
| Periods available | Two, ten years in total, for 500,000 |
| Deadline | Prescribed form to the Commissioner by 30 June of the first year of the period |
| Payment | One instalment by the end of the month following acceptance |
| Break-even, dividends at 5 percent | Approximately 1,000,000 of dividends a year |
| Break-even, dividends or interest at 17 percent | Approximately 294,000 a year |
| Break-even, bond interest at 3 percent | Approximately 1,667,000 a year |
| Not affected by the election | GESY, which reaches dividends at 2.65 percent regardless of domicile |
The election is made in advance, by 30 June of the first year of the five-year period, so it is decided on forecast income rather than on income received. It is irrevocable and nothing paid is refunded, so a forecast that proves wrong is not recoverable.
What 250,000 buys, and what it does not
The election introduced from 1 January 2026 lets an individual with a foreign domicile of origin keep non-domiciled treatment past the point the 17 of 20 year deeming rule would otherwise end it. It costs 250,000 for a five-year period and may be taken twice, so ten years costs 500,000.
What it displaces is Special Defence Contribution, and only that. The rates it keeps at bay are 5 percent on dividends out of profits earned from 1 January 2026, 17 percent on dividends out of profits earned to 31 December 2025, and 17 percent on interest.
Interest carries a reduced rate in defined cases. Under article 3(2)(b)(i) of the Law the rate is 3 percent on interest from savings certificates and development bonds of the Cyprus Government or the government of another EU Member State, from corporate debentures listed on a recognised stock exchange, and from bonds or debentures listed on a recognised stock exchange issued by a local authority or state organisation of Cyprus or another EU Member State. The distinction matters here more than anywhere else, because it changes the break-even by a factor of nearly six.
Three things it does not touch, because none of them turn on domicile:
- GESY, which reaches dividends at 2.65 percent whether or not the individual is domiciled, subject to the annual ceiling of 180,000 euro of total income. It falls on both sides of the comparison and cancels out of it.
- Income tax, which does not reach dividends in an individual's hands at all, whether the company paying them is Cyprus or foreign.
- Deemed dividend distribution, which the 2026 reform abolished for profits earned from 1 January 2026. Undistributed profits of 2024 and 2025 remain within those rules until 31 December 2027, and for those years the election still has work to do.
So the whole question reduces to one comparison: 50,000 a year against the Special Defence Contribution the individual would otherwise pay in that year.
The break-even, at each rate
At 5 percent, 50,000 of charge requires 1,000,000 of dividends. At 17 percent it requires approximately 294,000. At the reduced 3 percent on listed and government paper it requires approximately 1,667,000. The rate on dividends depends on which year's profits are being distributed rather than on when the distribution is made, so a single individual can sit on several rows of this table in the same year.
| Income within the charge, a year | Rate | Charge a year | Charge over five years | Against 250,000 |
|---|---|---|---|---|
| Dividends 250,000 | 5 percent | 12,500 | 62,500 | 187,500 worse |
| Dividends 500,000 | 5 percent | 25,000 | 125,000 | 125,000 worse |
| Dividends 1,000,000 | 5 percent | 50,000 | 250,000 | Break-even |
| Dividends 2,000,000 | 5 percent | 100,000 | 500,000 | 250,000 better |
| Dividends 294,000 out of pre-2026 profits | 17 percent | 49,980 | 249,900 | Break-even |
| Interest 1,000,000, bank deposits | 17 percent | 170,000 | 850,000 | 600,000 better |
| Interest 1,000,000, listed and government bonds | 3 percent | 30,000 | 150,000 | 100,000 worse |
The last two rows carry the same million of interest and land on opposite sides of the decision. What the portfolio holds decides the answer as much as what it earns.
The deciding number is not wealth. It is distributed income. A founder holding thirty million euro of assets who distributes 300,000 a year is on the wrong side of this table. A founder holding far less who clears a million a year in dividends is on the right side of it.
Two founders, the same status, opposite answers
Worked example
A founder who draws 400,000 of dividends a year out of current profits and holds no interest-bearing deposits of consequence. Deemed domiciled from the 2027 tax year.
| Step | Amount |
|---|---|
| Dividends a year | 400,000 |
| Special Defence Contribution at 5 percent | 20,000 |
| Charge over five years | 100,000 |
| Cost of the election | 250,000 |
| Result | Electing costs 150,000 more than paying the charge |
Paying the contribution is the cheaper route, and it keeps the money available year by year rather than committing it in a single irrevocable instalment.
Illustrative only. Figures are assumptions used to show the mechanics of the calculation, not a representation of any actual client outcome or of the result you would obtain.
Worked example
A founder who draws 1,500,000 of dividends a year out of current profits and holds a deposit portfolio producing 300,000 of interest. Deemed domiciled from the 2027 tax year.
| Step | Amount |
|---|---|
| Dividends a year | 1,500,000 |
| Special Defence Contribution on dividends at 5 percent | 75,000 |
| Interest a year | 300,000 |
| Special Defence Contribution on interest at 17 percent | 51,000 |
| Total charge a year | 126,000 |
| Charge over five years | 630,000 |
| Cost of the election | 250,000 |
| Result | Electing saves 380,000 over the period |
The interest is doing most of the work. At 17 percent, a deposit portfolio reaches the break-even on its own at approximately 294,000 of interest a year, where dividends need more than three times that.
Illustrative only. Figures are assumptions used to show the mechanics of the calculation, not a representation of any actual client outcome or of the result you would obtain.
What the same reform did to the value of the election
The election was created by the 2026 reform. So was the rate cut that reduced what it is worth.
Until 31 December 2025, Special Defence Contribution on dividends was 17 percent, and 250,000 would have been repaid by dividends of approximately 294,000 a year. From 1 January 2026 the rate on new profits is 5 percent, and the same 250,000 now requires dividends of 1,000,000 a year. The income needed to justify the price rose roughly three and a half times, while the price did not move.
That is the single figure most often missing from a discussion of this election, and both halves of it are needed to judge the number.
The four features of the election that make a wrong forecast expensive
The arithmetic assumes the forecast holds. Four features of article 3D mean that if it does not, nothing is recoverable.
It is made in advance. The application goes to the Commissioner on a prescribed form by 30 June of the first year of the five-year period it relates to, so the decision rests on income the individual expects rather than income received.
It is irrevocable and binds five consecutive tax years. A founder who sells the company in year two and stops distributing has still bought five years.
Nothing paid is refunded, for any reason. There is no proportionate return for a change of circumstances, including ceasing to be Cyprus tax resident.
No foreign tax credit is available against it, and it cannot be set off against other liabilities or credit balances. It is a cost, not a payment on account.
Doviandi models the election against projected distributions before the 30 June deadline, and the non-dom savings calculator runs the same arithmetic on your own figures.
Common questions
How much income do I need before the 250,000 extension pays for itself?
Approximately 1,000,000 euro of dividends a year, where those dividends come out of profits earned from 1 January 2026 and carry Special Defence Contribution at 5 percent. Where the income is interest, or dividends out of profits earned to 31 December 2025, the rate is 17 percent and the break-even is approximately 294,000 euro a year. The election costs 250,000 for five years, which is 50,000 a year.
Does the extension cover interest as well as dividends?
Yes. The election extends non-domiciled treatment, and Special Defence Contribution reaches dividends and interest, so both sit outside the charge for the period. Interest is taxed at 17 percent rather than 5 percent, which is why an interest-bearing portfolio reaches the break-even on roughly a third of the income that dividends require.
Does the reduced 3 percent rate on bonds change the answer?
Substantially. Article 3(2)(b)(i) of the Special Defence Contribution Law charges 3 percent rather than 17 percent on interest from Cyprus or EU Member State government savings certificates and development bonds, from corporate debentures listed on a recognised stock exchange, and from listed bonds issued by a local authority or state organisation of Cyprus or another EU Member State. At 3 percent the 250,000 election breaks even at approximately 1,667,000 euro of interest a year, against approximately 294,000 on bank deposit interest at 17 percent. Two portfolios of the same size can therefore fall on opposite sides of the decision.
Can I take the extension and then change my mind?
No. The election is irrevocable and binds five consecutive tax years, and no amount paid is refunded for any reason. Ceasing to draw dividends, selling the company or leaving Cyprus during the period does not produce a proportionate return. Where the forecast is close to the break-even, that irreversibility is itself a reason to pay the ordinary charge instead.
Does the election reduce my GESY contributions?
No. The health contribution reaches dividends at 2.65 percent whether or not the individual is domiciled in Cyprus, subject to an annual ceiling of 180,000 euro of total income across all sources. It is payable on the same income either way, so it falls out of the comparison between electing and paying Special Defence Contribution.
When do I have to decide?
By 30 June of the first year of the five-year period the election relates to, on a prescribed form to the Commissioner. Once the application is accepted, the full 250,000 falls due in a single instalment by the end of the following month, and if it is not paid in time the article does not apply for any year of the period.
Technical definition
An individual with a foreign domicile of origin who has been deemed Cyprus domiciled under the 17 of 20 year rule may elect to be treated as non-domiciled for a further five years on payment of 250,000, and may make that election twice. The charge it displaces is Special Defence Contribution on dividends and interest.
Practical implications
Because the charge on dividends depends on the year the distributed profits were earned, the break-even is not a single figure. Distributions out of profits earned to 31 December 2025 carry 17 percent and break even far sooner than distributions out of profits earned from 1 January 2026.
Common misconceptions
That the election is priced against the charge it was designed to displace. It is not. The same reform that introduced the election cut the dividend rate from 17 percent to 5 percent, so the exemption now being bought for 250,000 is worth roughly a third of what the identical exemption was worth in 2025.