The House of Representatives in Cyprus, approved a set of amendments to the income tax law and defense tax law on 9 December 2021, relating to
Both laws are coming into force on December 31st, 2022.
Until today, a company was considered as tax resident of Cyprus if its management and control is exercised in Cyprus. After this amendment, any company incorporated or registered in Cyprus whose management and control is exercised outside Cyprus will still be considered as tax resident of Cyprus, unless this company is considered as tax resident in any other state. As a result, a Cyprus-incorporated company can no longer be considered not to be tax resident anywhere. Unless a company is tax resident in a country included in the EU black list or if the company is incorporated in a country not included on the list, it is not tax resident in any jurisdiction
The 10% withholding tax will apply to royalty payments made to a company that does not have a residence in Cyprus but which has a residence in a country that is included in the EU blacklist of non-cooperative jurisdictions, or to a company incorporated in such a backlisted country which is not tax resident anywhere, regardless of whether the assets for which the royalty is paid will be used in Cyprus or elsewhere.
Dividends paid by Cypriot tax resident companies to companies tax resident in countries included in the EU black list of non-cooperative jurisdictions or to companies incorporated in such countries which are not tax residents anywhere will be subject to a 17% special defense contribution (“SDC”).
The above does not apply to companies listed on a recognized stock exchange.
The SDC rate on interest paid to a company that is not tax resident of Cyprus but tax resident in a country that is listed on the EU blacklist of non-cooperative jurisdictions, or to a company incorporated in one of those countries that is not considered tax resident anywhere, will be 30%.
The above does not apply to interest paid on securities listed on a recognized stock exchange.
Black listed countries
The list is adopted by EU on the 5th of October 2021 and consists of the below countries
American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.