It is charged at the rates shown in the table below:

Note:

*  Interest income from Cyprus government savings bonds and development bonds and all interest earned by a provident fund is subject to special contribution for defence at 3% (instead of 10%).  In the case where the total income of an individual (including interest) does not exceed €11.960 in a taxable year, then the rate is reduced to 3%.

Deemed dividend distribution

When a Cyprus resident company does not distribute dividends within two years from the end of a tax year; 70% of accounting profits will be deemed to have been distributed. Therefore the 15% special contribution for defence is payable on deemed distribution of dividends by shareholders who are Cyprus tax resident. Deemed distribution can be reduced by payments of any actual dividends already paid during the same period.  Where a Cyprus company is owned by another Cyprus company (with shareholders not tax resident in Cyprus), then defence contribution paid by the subsidiary may be claimed back by non resident shareholders.

Company dissolution

Upon dissolution, the cumulative deemed undistributed profits of the previous five years will be considered as distributed upon dissolution and thus subject to special contribution for defence.  This provision does not apply in the case of dissolution under a Reorganisation.

Reduction of capital of a company

In the event of a reduction of capital, amounts paid or due to shareholders will be subject to special defence contribution after deducting any amounts which have been deemed as distributable profits, up to the amount of undistributed taxable income of any tax year before the deduction of losses from prior years.