DIVIDEND TAX IN CYPRUS
The applicability of the dividend tax
In Cyprus, the dividend tax does not apply to non-residents, either corporate shareholders or individuals. The dividend tax does apply when dividends are received by a Cypriot resident taxpayer. When discussing tax purposes, a company is considered a Cypriot resident company if it has its management headquarters based in Cyprus. Likewise, an individual is a Cypriot taxpayer if he or she have lived in Cyprus for more than 183 in one tax year.
Holding companies in Cyprus do not have to pay withholding taxes on dividends, except for several cases detailed below. Our Cypriot company formation specialists are available in case you have any questions regarding detailed information for companies and individuals who are subject to tax.
The taxation of dividends in Cyprus
As stated above, dividends are usually exempt from tax in Cyprus, unless they are received by a Cypriot resident company or individual. The dividends received by a holding company from its subsidiaries will be taxed according to the country of residence of the payer. The Parent-Subsidiary Directive applies in this case and if the companies fulfill all the conditions, the dividend will be received free of tax. When the dividend does not come from a country with which Cyprus has signed a double tax avoidance treaty, the domestic rate for the taxation of dividends applicable in the source country will apply to the dividends.
When dividends are received from foreign companies, either EU or non-EU legal entities, no income tax is applicable on dividend income. An exemption from the special contribution for defense also applies, subject to certain conditions. Our company formation expert in Cyprus can give you more detailed information about the aforementioned defense tax.