Cyprus Dividend Tax (Special Contribution for Defence)

Tax residents of Cyprus are liable to pay the Special Contribution for Defence, non-tax residents are exempt.  Foreign taxes paid can also be credited against the defence tax liability.

It is charged at the rates shown in the table below:

Income Type

Tax rates

Individuals %

Legal entities%

Dividend from Cyprus resident companies



Dividend from non-Cyprus resident companies



(Subject to certain conditions)

Rental (after reduced of 25%)



*  Interest income from Cyprus government savings bonds and development bonds and all interest earned by a provident fund is subject to special contribution for defence at 3% (instead of 12.5%). In the case where the total income of an individual (including interest) does not exceed €12,000 in a taxable year, then the rate is reduced to 3%.

All companies (except for dormant and those not owning any assets) are required to pay an annual fixed duty of €350 to the Registrar of Companies.  For groups of companies the total duty is capped at €20.000.

Deemed dividend distribution

When a Cyprus resident company does not distribute dividends within two years from the end of a tax year; 70% of accounting profits will be deemed to have been distributed. Therefore the 15% special contribution for defence is payable on deemed distribution of dividends by shareholders who are Cyprus tax resident. Deemed distribution can be reduced by payments of any actual dividends already paid during the same period.  Where a Cyprus company is owned by another Cyprus company (with shareholders not tax resident in Cyprus), then defence contribution paid by the subsidiary may be claimed back by non resident shareholders.

Company dissolution

Upon dissolution, the cumulative deemed undistributed profits of the previous five years will be considered as distributed upon dissolution and thus subject to special contribution for defence.  This provision does not apply in the case of dissolution under a Reorganisation.

Reduction of capital of a company

In the event of a reduction of capital, amounts paid or due to shareholders will be subject to special defence contribution after deducting any amounts which have been deemed as distributable profits, up to the amount of undistributed taxable income of any tax year before the deduction of losses from prior years.