Deemed Dividend Distribution (DDD) – Key Obligations for 2025

Cyprus tax resident companies with accounting profits for the tax year 2023 that fall within the Deemed Dividend Distribution (DDD) provisions must ensure that at least 70% of their after-tax accounting profits are distributed by 31 December 2025.

Where applicable, the related Special Contribution for Defence (SDC) at 17% and General Healthcare System (GHS) contributions at 2.65% must be paid by 31 January 2026.

Failure to meet the above distribution threshold will trigger a deemed dividend distribution as at 31 December 2025.

What is the Deemed Dividend Distribution?

The DDD provisions apply to Cyprus tax resident companies whose profits are ultimately attributable to:

• Cyprus tax resident and Cyprus-domiciled individuals (for SDC purposes), and
• Cyprus tax resident individuals, irrespective of domicile (for GHS purposes).

The provisions do not apply to the proportion of profits attributable to:

• Non-Cyprus tax resident individuals, or
• Cyprus tax resident individuals who are not Cyprus-domiciled (SDC only).

When Does DDD Apply?

The DDD provisions apply where a Cyprus tax resident company does not distribute at least 70% of its after-tax accounting profits within two years from the end of the tax year in which those profits were generated.

For tax year 2023, the critical date is 31 December 2025.

If the required distribution is not made by that date:

• 70% of the adjusted profits is deemed to have been distributed, and
• SDC and GHS contributions (where applicable) become payable by 31 January 2026.

Reduction for Actual Dividends Paid

The amount subject to deemed distribution is reduced by any actual dividends paid:

• During the year in which the profits were generated (2023), or
• During the following two years (up to 31 December 2025),
  provided such dividends relate to the 2023 accounting profits.

Tax Treatment at Shareholder Level

Special Contribution for Defence (SDC)

• 17%, applicable to dividends (actual or deemed) paid to Cyprus tax resident and Cyprus-domiciled individuals.
• Also applies where shareholders are Cyprus companies ultimately owned by Cyprus-domiciled individuals.

General Healthcare System (GHS)

• 2.65%, applicable to dividends (actual or deemed) paid to Cyprus tax resident individuals, irrespective of domicile.

Dividends Paid to Other Companies

Dividends paid to Cyprus tax resident companies are generally exempt from SDC and GHS, subject to the following:

• Timing rule: If the deemed distribution date occurs before an actual dividend is paid, SDC and GHS may still be payable, with no refund available.
• Four-year rule: If four years have passed from the end of the year in which the profits arose, the exemption may no longer apply.

Payment of SDC and GHS

Payments can be made via the Cyprus Tax Portal using:

• Credit / debit card (via JCCSmart), or
• Online banking.

Late payments can only be made via online banking.

Relevant Tax Codes

Filing Obligations

For actual dividend distributions, Form T.D.603 must be submitted via TAXISnet by the end of the month following the declaration date.

For deemed dividends, the relevant declaration must be submitted by 31 January 2026.

Late submission carries a fixed penalty of €100.

Interest and Penalties

Late payment of SDC or GHS is subject to:

• Interest at 5.5% per annum, and
• 5% penalty on the outstanding tax.

An additional 5% penalty may apply if the tax remains unpaid two months after the due date.