Taxation on dividends in Cyprus is one of the key factors attracting investors to this jurisdiction. Cyprus has long been known for its favorable tax conditions, particularly in terms of taxation on dividend income.
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Dividend Tax for Individuals and Legal Entities
For individuals who are tax residents of Cyprus, the dividend tax rate is 0%. This means that, whether receiving dividends within Cyprus or from abroad, tax residents of Cyprus are not required to pay dividend tax. However, there is a Special Contribution for Defence, which is 17% for dividends paid within Cyprus and 30% for dividends received from abroad. Nevertheless, individuals who are not “domiciled” tax residents of Cyprus are exempt from this contribution, making Cyprus particularly attractive for expatriates and foreign investors.
For legal entities registered in Cyprus, the dividend tax is also 0%, allowing companies to minimize tax liabilities and optimize their financial flows.
Special Benefits and Features
Cyprus also offers additional tax benefits for certain sectors of the economy. For example, income related to intellectual property can be taxed at a reduced rate thanks to the IP Box regime. This regime allows companies to reduce the taxable base by up to 80% on profits derived from the use of qualified intellectual property assets.
Income from shipping activities is fully exempt from taxation, making this sector especially attractive to investors. Additionally, there is the IP Box regime, which significantly reduces the corporate tax for companies involved in the development and commercialization of intellectual property.
Furthermore, income from the sale of shares, except in cases where the shares are related to real estate in Cyprus, is not subject to taxation. This exception makes Cyprus a convenient platform for holding companies that own assets in other countries.
In addition, Cyprus attracts investors by not imposing capital gains tax on the sale of shares and securities, except in cases related to real estate in Cyprus.
Additional Aspects of Dividend Taxation in Cyprus
Tax Residency Status
Tax residency in Cyprus is determined by the 183-day rule. If an individual stays in Cyprus for 183 days or more within a calendar year, they are considered a tax resident of Cyprus and are required to pay taxes on their global income. For legal entities, tax residency is determined by the place of management and control of the company. Importantly, Cyprus has signed numerous double taxation avoidance agreements, which help reduce tax liabilities on income earned abroad.
Cyprus remains one of the most attractive jurisdictions for business and investment due to its favorable tax regime. The zero dividend tax rate for residents, flexible tax residency rules, and an extensive network of double taxation avoidance agreements create ideal conditions for international companies and individuals. Thanks to these advantages, Cyprus continues to attract investors from around the world, offering them opportunities for tax optimization and efficient asset management.
