Deemed Dividend Distribution as of 31 December 2025
We would like to remind you the obligations that arise from the deemed dividend distribution that apply on 31 December 2025.
The deemed dividend distribution provisions apply to the profits of Cypriot tax resident companies that are attributable to shareholders which are Cypriot tax resident and Cypriot domiciled individuals.
These provisions do not apply to shareholders which are non-Cypriot tax resident individuals or Cypriot tax resident individuals that are not Cypriot-domiciled.
The deemed dividend distribution provisions apply where a Cypriot tax resident company has not distributed at least 70% of its after tax profits within two years from the end of the tax year to which such profits relate.
In such a case, the undistributed part of such profits is subject to Special Defence Contribution at the rate of 17%.
Therefore, companies with accounting profits for tax year 2023 that fall within the deemed dividend distribution provisions, would have to declare an appropriate amount of dividend, in order to meet the 70% threshold of distributed profits on or before 31 December 2025 and pay the relevant Special Defence Contribution by the end of the following month that the dividend was declared. If not, on 31 December 2025, the relevant undistributed profits (up to the 70% threshold) would be considered as deemed distributed and the relevant Special Defence Contribution would need to be paid by 31 January 2026.
The distribution of either an actual or a deemed dividend to shareholders which are Cypriot tax resident individuals irrespective of their domicile status is subject to contributions to the General Healthcare Scheme – GESY at the rate of 2,65%.
General Healthcare Scheme contributions on actual dividends would need to be paid by the end of the following month that the dividend was declared and on deemed dividends by 31 January 2026.
Dividends paid to shareholders which are either non-Cypriot tax resident companies or Cypriot tax resident companies (subject to the 4-year rule) are exempt from Special Defence Contribution. Such dividend payments are exempt from GHS contributions.
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