Defence Fund Contribution

The Defence Fund Special Contribution is imposed on income accrued from sources in Cyprus received by any person resident in Cyprus.

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Rates

Rates DetailsIndividuals %Other Persons %

Interest [except interest accrued to any personfrom the ordinary carrying on of his business, which is exempt); interest received by a Group Finance Company from its group company members (>50% directly or indirectly or exercise of control) is deemed as accrued from the ordinary carrying on of its business and therefore exempt]

1010

Dividends received or deemed to be received from a company resident in Cyprus

15 
Dividends received from abroad15(1)

Interest from savings certificates and development stocks issued by the Government

310
Interest accrued from the provident fund  3
Profits of a Public Corporate Body  3

Rents (reduced by 25% instead of actual expenses)

33

(1) In the case that the dividends are received from a company where the shareholders hold directly at least 1% of the share capital, then the dividends are exempt from the payment of special contribution.

This exception does not apply if:

  • The company paying the dividend engages more than 50% in activities that lead to investment income, and
  • The foreign tax burden on the income of the company paying the dividend is substantially lower than the tax burden of the company that receives the dividend.

Refund

An individual, - whose annual income, including interest - does not exceed the amount of ₤7.000, has the right to a refund of the tax withheld on interest in excess of the amount corresponding to 3%.

Foreign Tax Allowance

In case that foreign tax was paid on income subject to special contribution, this can be given as an allowance against the special contribution payable on the income, irrespective of the existence of a double taxation relief with the foreign country.

Deemed Distribution

A company resident in Cyprus has to pay 15% special contribution to the defence fund based on a deemed distribution of 70% of the accounting profits after taxation and before set-off of losses brought forward from previous years; after taking into consideration any dividends paid within the two years and which relate to residents of Cyprus (Non - Resident Beneficial Shareholders are exempt).