DIVIDEND INCOME

Dividend Income is the amount receive from various investments during the distribution of their profits to the their owners. Dividend income is a passive income and is usually subjected to withholding tax (note 1).

In this article, we will refer to dividend income distributed to Cyprus Tax Residents (Cyprus Companies or Individuals)

Individuals

• If you receive dividend income from a Cyprus Company SDC will withheld by the Cyprus Company according to the tax residence status. Therefore taking into consideration that in this article we are talking for Cyprus Tax Residents, a 17% withholding tax will be deducted from the gross dividend.

• If you receive dividend income from from abroad, tax or any other withholding amount will withheld by the payer overseas Company according to their tax rules. An individual Cyprus Tax Resident you have a overall tax obligation of 17%. The tax should be paid to the Cyprus Tax Authorities through self-assessment. Any tax paid (withheld) abroad, can  claimed as credit taking into consideration that there is a tax treaty between the Cyprus and the country where the tax was paid /withheld at source. For example, you are allowable to receive from Ukraine gross dividend of €100,000. WHT in Ukraine is 15% therefore, €15,000 was paid or need to paid to the Ukraine Tax Authorities according to the Ukraine tax law. Since there is tax treaty between Cyprus and Ukraine, you should pay in Cyprus through self assessment, the amount of €2,000 (€100,000 * 17% less €15,000). 

Companies

• If a CY Tax Resident Company receives dividend income from a Cyprus Company, no tax will be withheld by the payer CY Company.
• If a CY Tax Resident Company receives dividend income from a foreign Company ((note 2), you have no obligation to pay any tax (SDC) in Cyprus taking into consideration that you meet the following conditions.
  • The overseas company/entity that pays the dividend, has investment income less than 50% of its overall income
  • The tax rate of the country the overseas company is taxable is not significant lower that tax rate of Cyprus. Cyprus Tax Authorities clarified that significant lower equals to 6.25%. 

Notes:
1.When a Company pays or distributes the its profits in the form of dividend, it usually deducts an amount from the gross amount and pays the owner with the net. The WHT is payable to the relevant authorities accordingly.
2. Tax or any withheld amount can be withheld at source or will be paid in the country where the Company is taxable. For example, if the company that distribute dividends to Cyprus Company is a Spain company, then tax (WHT) will be paid according to the tax rules in Spain.