Withholding tax and Defence tax

There is no withholding tax on the payments remitted abroad by Resident Companies, with foreign participation, for dividends, interest and royalty rights.

Further there is no defence tax on dividends paid to non residents of Cyprus.

Defence tax will be levied on rental income, on passive interest (where it is envisaged that a Cyprus resident company wishes to grant loans to an overseas resident it should be set up as a private finance company, as interest earned is considered as generated form normal activities i.e. is not passive), on dividends, on profits and rents. Fo further info regarding the rates please see below.

Any taxes paid on overseas rents and interest received is credited against the defence tax payable in Cyprus irrespective of the existence of a double tax treaty.

Defence Fund Contribution - Rates
Rates Details Individuals % Other Persons %
Interest [except interest accrued to any person from 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] 10 10
Dividends received or deemed to be received from a company resident in Cyprus 15
Dividends received from abroad 15 (1)
Interest from savings certificates and development stocks issued by the Government 3 10
Interest accrued from the provident fund 3
Profits of a Public Corporate Body 3
Rents (reduced by 25% instead of actual expenses)  3 3

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