In the Part I of this article, the following cases were covered:
- Rental Income
However, it is to be noted that in the case of companies, except the standard annual dividend distribution a number of several other situations may arise:
Deemed Dividend Distribution
In cases where a Cyprus tax resident company does not distribute profits within two years after the end of the tax year in which these profits arose, then 70% of these profits are considered as distributed and Special Defence Contribution shall apply at the rate of 17% on such dividends.
What happens in the cases of undistributed profits of companies that are to be dissolved? The total of the profits accumulated in the five years preceding the liquidation process, that have not been distributed or deemed to be distributed are considered as distributed on the liquidation process and Special Defence Contribution provisions shall apply at the rate of 17%. However, it is to be noted that if the dissolution of the company takes place within the frames of the restructuring of a group of companies, then it might be exempted. For legal advice on this particular point and whether it applies in your case, please get in touch with our lawyers.
In the case of capital reduction, any amount exceeding the paid up share capital that is to be paid to the shareholders is considered as distributed dividends and in this case as well the relevant defence tax provisions apply. The applicable tax rate is 17 %.
For further information or legal advice on the Special Contribution for Defence and any other cases that might have been omitted from the present article, please get in touch with our team.