Cyprus tax residents:
- individuals staying in the territory of the Republic of Cyprus for more than 183 days a year. The required period of stay is reduced to 60 days for persons who are not tax residents of another country if they have rented or own permanent residence in Cyprus or conduct business here;
- legal entities managed and controlled in Cyprus.
Dividend tax for individuals
Non-resident individuals are exempt from paying tax on dividends.
Tax residents must pay income tax and special defense contribution (SDC) on all profits earned. Interest on dividend income is included only in the amount of the tax base for SVO and is calculated at a rate of 17%.
If the source of payment of dividends is in Cyprus, the SVO is paid until the end of the next month following the month in which this income was received. If income is received from abroad, payment is made twice a year – at the end of the second and fourth quarters.
A tax resident may be exempt from paying the IRS if the Republic of Cyprus is not his domicile, which in legal practice means permanent residence determined by birth or at will. A person who has been a local tax resident for at least 17 out of the last 20 years can choose the Republic of Cyprus as their domicile.
Dividend tax in Cyprus for companies
Non-resident companies in Cyprus do not pay income tax on dividends.
For resident legal entities, the taxation scheme for dividend income is slightly more complex than for individuals. There are three main taxation options, depending, among other things, on the tax residency of the company that paid the dividends.
- A legal entity does not pay tax on dividends received from another company that is also a resident of Cyprus.
- A legal entity pays a dividend tax of 12.5% as part of the income tax. These rules apply if the resident company that paid the dividends deducted them from the tax base.
- A legal entity pays a dividend tax of 17% as part of the special contribution for defense. This scheme applies if the company that paid the other dividend is not a tax resident of the Republic of Cyprus, but received more than half of the profit through investments, and also if the tax rate in the country of this payer is several times lower than the tax rate in Cyprus.