Deemed Dividend Distribution


The Deemed Dividend Distribution (DDD) provisions apply to the profits of Cypriot tax resident companies that are ultimately attributable to shareholders which are Cypriot tax resident and Cypriot domiciled individuals.

These provisions do not apply to the proportion of profits that are ultimately attributable to shareholders which are non-Cypriot tax resident individuals or Cypriot tax resident individuals that are not Cypriot-domiciled.

The DDD provisions apply to all Cyprus companies and indicates that 70% of their after tax profits must be distributed within 2 years from the tax year in which the profits are generated.

Special Defence Contribution (SDC) of 17% and General Healthcare Scheme (GHS) of 2.65% (as of 1/6/2020) must be deducted at source depending on the tax residence and domicile status of each shareholder. The net amount is given to the shareholders and the SDC and GHS contributions have to be paid to the Tax Department by the Company.

The payment date for SDC is at the end of the following month after the actual distribution date.

If 70% of the relevant profits are not distributed up to the due date, then Deemed Dividend Distribution (DDD) arises and the respective SDC and GHS contributions must be paid on the distributable profits up to 70%.

Payment of Actual Dividends

The Deemed Dividend Distribution is reduced with payments of actual dividends paid during the relevant year the profits were generated or paid during the following two years.

Parties not liable to deemed distribution

  • International Business Centres (assuming all shareholder are not residents or not-domiciled)
  • Provided funds
  • Charitable Institutions
  • Non Cyprus resident/domiciled individuals
  • Non Cyprus resident companies

Dividends to other Companies

Dividends paid to another company are not subject to SDC and GHS, but subject to the following exemtion.

Exemption: if the deemed distribution date comes first, then SDC and GHS contributions are payable and no refund is available for the CY resident companies.

Four year rule: Applicable to dividends paid between Cyprus tax resident companies –  if four years have passed from the end of the year in which the profits arose, then the above exemption does not apply.

GHS contributions on actual or deemed dividend distributions

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 (GHS) at the rate of 2,65%.

For more details on GHS contributions, please refer to the guidance issued by the Cyprus Tax Authorities. GHS 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.


The shareholders considered to relate with the DDD are those that exists at the end of the period of the 2 years.

Profits for Deemed Distribution

  • Accounting profits in accordance with IASs and IFRSs
  • Profits for DDD should be calculated:
    • After Corporate Tax, SDC, Capital Gains Tax and unrelieved foreign taxes
    • After transfer to reserves required by law
    • Before accounting losses brought forward
    • Before any additional depreciation due to revaluation
    • Before any revaluation of fixed or movable assets and
    • Before any impairment loss on valuation of shares
  • Not allowed for DDD:
    • Revaluation of fixed or movable assets
    • Transfers between companies for the purpose of group tax relief
    • Additional depreciation due to revaluation of assets
    • Accounting losses brought forward
    • 10% additional tax (circular 2008/9) if 75% of tax not paid on time

Payments of SDC and GHS

Prompt payments are made via JCC smart or online banking while late payments can only be made via online banking.

The relevant tax codes per payment type are provided below:

SDC on actual dividends paid – Tax code 603

SDC on deemed dividends distribution – Tax code 623

GHS contributions on actual dividends paid – Tax code 703

GHS contributions on deemed dividends distribution – Tax code 723

Tax declaration for actual dividend distribution

For actual dividend distribution, Form T.D.603 “Declaration of withheld Special Contribution for Defence (SDC) and General Healthcare Scheme (GHS) from Dividends” should be submitted by the end of the following month that the dividend was declared, through TAXISnet. Late submission carries a fixed penalty of €100.

Interest and penalties for late payment

  • Interest of 75% per annum is charge if SDC or GHS is not paid on time.
  • €100 for failure to submit a tax return or to supply information within the deadline set by the law.
  • 5% penalty for failure to pay the related tax by the due date.
  • An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.
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Cyprus Tax Department

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