Recent Amendments passed in 2009 in relation to the Income Tax and Special Contribution for the Defence of the Republic of Cyprus

On 22 October 2009, the Cyprus Parliament passed certain amendments to the Cyprus regime on income tax and special contribution for the defence of Cyprus, which aim at providing further tax incentives to investors. These amendmets mainly target the areas of interest income and foreign dividend income exemption and render the position of Collective Investments Schemes (“CIS”) rather favourable.

Interest income received by Cyprus tax resident companies, CIS or individuals

Companies and CIS

Interest received by a Cyprus Company or a CIS (whether open-ended or closed-ended) is subject to 10 % tax, following a deduction of relevant expenses.


Interest received by individuals in the ordinary course of business is taxed under income tax law depending on each individual’s level of income, following a deduction of relevant expenses.


Interest received by any individual or company not falling under any of the aforementioned categories is subject to 10 % special contribution defence tax, without deduction of relevant expenses therefrom.

Foreign dividend income received by Cyprus tax resident companies


In the case of a Cyprut tax resident company, the minimum 1 % holding requirement for the exemption of foreign dividends from taxation in Cyprus has now been abolished.


  • Dividend deemed distibutions, including those resulting from liquidation, are now subject to 3 % special defence rate (reduced from previous applicable tax rate of 15 %);

  • Redemption of units or other interest in a CIS, whether open-ended or closed-ended, is not subject to special defence rate. It constitutes a disposal of titles and any resulting gain is not subject to tax.