On 1 January 2026, Cyprus enacted the most significant overhaul of its tax framework in a generation.

The reforms are not incremental - they represent a fundamental restructuring of how Cyprus taxes individuals and companies, with changes that directly enhance its attractiveness for internationally mobile UHNW clients. Combined with the displacement of wealth from the UK following non-dom abolition, and the urgency created by the reverting TCJA estate tax exemption, the timing could not be more relevant for U.S. private wealth advisors.

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What Has Changed

Three reforms stand out as immediately material for U.S. advisors and their clients.

First, the Special Defence Contribution on dividends has been cut from 17% to 5% for domiciled Cyprus tax residents on profits generated from 2026 onwards. For qualifying non-domiciled residents - the category most relevant to internationally mobile UHNW clients - the rate remains 0%. Cyprus is now one of the few EU jurisdictions where passive income from dividends can be received entirely free of local tax.

Second, the SDC on rental income has been abolished entirely for all Cyprus tax residents from 1 January 2026. Previously levied at 3%, its removal is a straightforward improvement for property-owning HNW clients and removes a friction cost that previously complicated Cyprus holding structures involving real estate.

Third - and perhaps most significantly for U.S. advisors structuring Cyprus holding companies and family investment vehicles — the automatic deemed dividend distribution mechanism has been abolished for profits generated from 2026. This mechanism previously required Cyprus companies to treat a proportion of undistributed profits as dividends for SDC purposes, creating an artificial tax liability on retained earnings. Its abolition allows full profit retention and materially enhances the utility of Cyprus corporate structures for long-term wealth accumulation.

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What This Means for U.S. Clients

The reforms land on top of a framework that was already highly competitive. Cyprus continues to offer no inheritance tax, no wealth tax, no gift tax, and no capital gains tax on the disposal of securities. The 60-day tax residency route remains — meaning clients can establish Cyprus tax residency without spending the majority of their year in the jurisdiction. The IP Box regime, with an effective rate as low as 2.5% on qualifying intellectual property income, and the Notional Interest Deduction on new equity remain fully intact.

For U.S. advisors structuring international holding companies, family investment platforms, or residency-linked succession plans, the 2026 reforms deliver material improvements in efficiency and certainty on top of an already strong foundation. And with the TCJA exemption reverting to ~$7 million per individual, the urgency of finding complementary offshore platforms has never been greater.

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Why It's Attractive Right Now

The post-UK non-dom landscape has created a significant cohort of internationally mobile UHNW individuals actively seeking EU-based alternatives. Cyprus, with its warm climate, English-speaking legal system, EU membership, and now significantly enhanced tax framework - is one of the primary beneficiaries of that displacement. For U.S. advisors with clients who have UK connections, UK-resident family members, or existing structures requiring post-non-dom review, Cyprus is a logical, well-structured, and immediately available destination.

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How Affinity Can Help

Affinity provide corporate and private wealth services across the globe. We pride ourselves on our personal, boutique approach.

If you would like to discuss international structuring, contact our team to learn more.

Contact our CEO, Andy Morgan, to arrange a meeting directly.

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