Cyprus Deemed Dividend Distribution: 2024 Tax Obligations Explained

Cyprus tax resident companies are required to comply with the 2024 deemed dividend distribution provisions to avoid penalties and ensure tax compliance. Under these provisions, companies must declare at least 70% of their 2022 accounting profits by 31 December 2024. Any resulting Special Contribution for Defence (SDC) at 17% and National Health Contribution (NHC) at 2.65% must be withheld and paid by 31 January 2025.

What Is Cyprus Deemed Dividend Distribution in 2024?

Deemed dividend distribution is a tax provision in the Special Contribution for Defence Law and the National Health Contribution Law. It applies to Cyprus tax resident companies that fail to distribute at least 70% of their accounting profits for a specific tax year to their shareholders. The key rules include:

1. Special Contribution for Defence (SDC):
   • Applies to Cyprus tax resident and domiciled shareholders (individuals or corporations).
   • Triggered if a company does not distribute the required profits by the deadline.
2. National Health Contribution (NHC):
   • Applies to Cyprus tax resident individual shareholders (domicility is irrelevant).

Key Dates for 2024 Deemed Dividend Distribution in Cyprus

• Deadline to Distribute Profits: 31 December 2024.
• Deadline to Pay Taxes: 31 January 2025.
• Forms Submission Deadline: End of the month following the declaration of the dividend (actual or deemed).

If no profits are distributed by 31 December 2024, it will be deemed that 70% of the company’s after-tax profits have been distributed, and the respective taxes will apply.

Who Is Affected by the Deemed Dividend Distribution Rules?

• For SDC:
  • Applies to Cyprus tax resident and domiciled individuals or corporate shareholders with ultimate or immediate Cyprus tax resident and domiciled shareholders.
• For NHC:
  • Applies to all Cyprus tax resident individual shareholders (domicility irrelevant).
• Exemptions:
  • Companies owned by non-Cyprus tax resident individuals are exempt from deemed dividend distribution provisions.

Tax Payment and Reporting Obligations

To comply with the 2024 deemed dividend distribution provisions, companies must:

1. Pay Taxes:
   • Special Contribution for Defence (17%) for Cyprus tax resident and domiciled shareholders.
   • National Health Contribution (2.65%) for all Cyprus tax resident shareholders.
2. Submit Forms Electronically via Taxisnet:
   • Form T.D. 603: For actual dividend distributions.
   • Form T.D. 623: For deemed dividend distributions.

Penalties for Late Payments or Submissions

Non-compliance can result in:

• Interest: 5% per annum on overdue payments.
• Penalties:
  • 5% penalty on the tax due.
  • Additional 5% penalty if unpaid two months after the deadline.
• Late Form Submission Penalty: €100 for T.D. 603 or T.D. 623 submissions.

Tax Codes for Payments

Use the following codes for electronic submissions:

Stay Compliant

If you need assistance with the 2024 deemed dividend distribution or have questions about your tax obligations, we are here to help. Contact us today for tailored advice and support.

For more information, visit the Ministry of Finance website.