All companies must distribute 70% of their after tax profits within 2 years from the tax year in which the profits are generated.

Special Defence Contribution (SDC) is deducted at source at 17%. The net amount is given to the shareholder and the SDC has 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 profits are not distributed up to the due date, then Deemed Dividend Distribution (DDD) arises and the respective SDC must be paid.


Payment of 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 individuals
  • Non Cyprus resident companies


Dividends to Companies

Dividends paid to another company are not subject to SDC – the transaction is exempt from SDC.

Exemption: if the deemed distribution date comes first, then SDC is 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.


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



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



All companies resident in the Republic need to complete and submit the IR623 return every year for the purpose of deemed distribution. IR623 can only be submitted electronically and pay the related SDC due electronically through JCC (

IR623 (or the declaration that the company does not have to submit the IR623) should be submitted no later than by 31 January  following the deemed distribution date.


Interest and penalties for late payment

  • Interest of 4% per annum is charge if SDC 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