Cyprus measures for EU-blacklisted jurisdictions

Further to our previous post, on 21 December 2021 the Cypriot Income Tax Law and Special Defence Contribution Law were amended for the introduction of defensive tax measures that will apply in Cyprus in relation to jurisdictions included on the EU list of non-cooperative jurisdictions for tax purposes (commonly referred to as “EU blacklisted jurisdictions”).

In accordance with the amendments, as from 31 December 2022, Cyprus will apply a withholding tax (WHT) on outbound payments of dividends, interest and royalties, if the recipient is a company in an EU blacklisted jurisdiction, as follows:

  • Dividends at the rate of 17%
  • Interest at the rate of 30%
  • Royalties at the rate of 10%

The EU list of non-cooperative jurisdictions for tax purposes

The EU blacklist currently includes 9 jurisdictions, as follows and can be found here:

  • American Samoa
  • Fiji
  • Guam
  • Palau
  • Panama
  • Samoa
  • Trinidad and Tobago
  • US Virgin Islands
  • Vanuatu

Companies affected 

In accordance with the amendments the tax measures shall apply to companies that are:

  • resident in an EU blacklisted jurisdiction; or
  • incorporated / registered in such jurisdiction; and
  • not a tax resident in another jurisdiction that is not listed in the EU blacklist.

Outbound payments of dividends

Currently, no withholding tax is levied on outbound dividend payments to non-Cyprus tax resident shareholders (companies or individuals).

The amendments provide that a WHT at the rate of 17% shall apply to affected companies which participate directly either with more than 50% in the voting rights, or more than 50% in the capital or entitled to receive more than 50% of the profits of a Cypriot company.

An exemption applies for outbound payments of dividends received by an affected company in respect of titles listed on any recognized stock exchange.

In addition, an anti-abuse provision has been introduced in case the Cyprus resident company is held directly by more than one affected company, in order to circumvent the 50% rule above.

Outbound payments of interest

Currently, no WHT is levied on outbound interest payments to non-Cyprus tax resident shareholders (companies or individuals).

The amendments provide that WHT at the rate of 30% shall apply, on “passive” interest received or credited to an affected company from a Cyprus resident company. An exemption applies for payments of interest received or credited to an affected company in respect of titles listed on any recognized stock exchange.

Outbound payments of royalties

Currently, WHT at the rate of 10% is levied on outbound royalty payments to foreign tax residents (companies or individuals), who are not engaged in any business in Cyprus, for royalty income derived in Cyprus on rights granted for use in Cyprus.

The  amendments enhance the existing provisions and provide that a WHT at the rate of 10% shall also apply, on royalty income derived in Cyprus by an affected company for rights granted for use outside Cyprus.

How can we help?

We are at your disposal to discuss the effect of the above provisions to your corporate structure and arrangements.

Got a question? Get in touch

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