Cyprus tax resident companies are required to distribute at least 70% of their accounting profits for the tax year 2022 by 31 December 2024. Any resulting Special Contribution for Defence (17%) and National Health Contribution (2.65%) must be withheld and paid by 31 January 2025.
This requirement is based on the provisions of the Special Contribution for Defence Law and the National Health Contribution Law, which outline the conditions under which accounting profits are subject to deemed dividend distribution.
Who is Affected?
- Special Contribution for Defence (SDC):
- Applies to companies with Cyprus tax resident shareholders who are also Cyprus domiciled.
- Triggered when a company fails to distribute at least 70% of its accounting profits for a specific tax year.
- National Health Contribution (NHC):
- Applies to companies with Cyprus tax resident individual shareholders, irrespective of domicile.
- Exemption:
- Companies ultimately owned by non-Cyprus tax resident individuals are not subject to these provisions.
Key Deadlines
- 31 December 2024: Deadline for distributing at least 70% of 2022 accounting profits.
- 31 January 2025: Deadline for withholding and remitting the applicable SDC and NHC.
If the required profits are not distributed by 31 December 2024, they will be deemed as distributed to the company’s Cyprus tax resident shareholders. This deemed distribution triggers the following:
- 17% SDC on Cyprus tax resident and domiciled shareholders.
- 2.65% NHC on all Cyprus tax resident shareholders.
Any dividends already paid out of the 2022 accounting profits during the period 1 January 2022 to 31 December 2024 will reduce the amount subject to deemed distribution.
Practical Examples
- If a Cyprus tax resident company does not distribute 70% of its 2022 profits by the end of 2024, the unpaid portion will be considered as distributed, and the company must account for the relevant taxes on behalf of its shareholders.
- These provisions apply to corporate shareholders if their ultimate or immediate individual shareholders are Cyprus tax resident and domiciled.
For NHC purposes, the provisions also apply to companies with Cyprus tax resident individual shareholders, regardless of domicile.
Tax Reporting Obligations
The deemed dividend distribution, as well as any actual distributions, must be reported electronically through the Taxisnet system:
- Use Form T.D. 603 for actual dividends.
- Use Form T.D. 623 for deemed dividend distributions.
The deadline for submitting these forms is the end of the month following the dividend declaration or deemed declaration.
Penalties for Non-Compliance
Failure to remit the SDC or NHC by 31 January 2025 will result in:
- Interest at 5% per annum (current rate).
- A fixed penalty of 5% on the unpaid tax.
- An additional 5% penalty if the tax remains unpaid for two months after the due date.
Late submission of Forms T.D. 603 or T.D. 623 will incur a €100 penalty.
Tax Codes for Payments
Type of Payment | Tax Code |
SDC on actual dividends | 603 |
SDC on deemed dividend distribution | 623 |
NHC on actual dividends | 703 |
NHC on deemed dividend distribution | 723 |
Please refer to our Tax Calendar for the year 2025, so that not to miss any important tax due dates and deadlines.
As always, M. Target Group specialists remain at your disposal should you require any further information, clarification or professional assistance with any matter.
