Dividends
· A resident company, which receives dividend from
another Cyprus resident company, is relieved from
the payment of any defence contribution.
· A company (resident or non resident) with a permanent
establishment in Cyprus receiving dividend from a
non-resident company is relieved from contribution
to the defence fund if:
- It holds at least 1% of the share capital of the
company paying the dividend; and
- If the activities of the non-resident company lead
to less than 50% investment income and the income
tax charged on these profits is not substantially
less than the corresponding Cyprus Income Tax.
Deemed distribution
· A company resident in Cyprus for tax purposes shall
be deemed to have distributed 70% of its accounting
profits (after deduction of tax paid on these profits
and transfers to legal reserves) in any fiscal year
by way of a dividend to its resident shareholders
at the end of the second year following the end of
the said financial year, in which the profits were
made. The company shall be obliged to effect payment
to the Inland Revenue equal to 15% of the amount of
the deemed dividend distribution. Such dividend shall
be reduced by the amount of dividends actually distributed.
Deemed distributions are not applicable to non-resident
shareholders.
Other
· A resident company receiving interest income is
subject to a tax rate of 10% (at source).
· A resident company receiving rent income is subject
to a tax rate of 3% on the rental income after the
deduction of 25% for allowable expenses.
· Upon the reduction of the share capital of a company,
any undistributed reserves will be considered as deemed
distributions.
· IBC’s which have opted to be taxed at Income Tax
rates of 4,25% for the years 2003, 2004 and 2005,
will be relieved from the contribution to the defence
fund on any income which might have otherwise been
taxable.
· The above provisions are not applicable to ship
owning and ship management companies
