New profits and older reserves
Cyprus abolished deemed dividend distribution for profits earned from 2026 onwards. Transitional provisions remain relevant to earlier profits. In particular, the review of 2024 profits can still be important at 31 December 2026 where those profits are attributable to Cyprus tax resident and domiciled shareholders.
The reduced dividend rate has conditions
The reform reduces Special Defence Contribution on dividends to 5% for the relevant new-profit regime. This is not a universal tax on every shareholder receiving a dividend from Cyprus. The recipient’s tax residence and domicile, the year in which the underlying profits arose and the transitional rules must be considered.
Why foreign shareholders should still review payments
Overseas ownership does not remove the need to check a proposed distribution. Particular rules can affect corporate recipients in low-tax or EU-listed non-cooperative jurisdictions. The shareholder’s home country may also tax the dividend. A payment should be reviewed in its actual ownership and jurisdictional context.
Prepare the records before transferring funds
Before approving a dividend, identify the reserves from which it will be paid and reconcile previous distributions. Ask the accountant to confirm the available distributable profits and the tax treatment. Ensure the relevant corporate approval is documented and that the bank transfer description matches the approved payment.
Contact Credora
Contact Credora Management Ltd to coordinate the corporate documentation for a proposed dividend with your accountant and tax adviser.
Sources
- PwC Cyprus tax reform overview including dividend transitional provisions
- Cyprus Ministry of Finance tax incentives
General information as at 12 October 2026. This article is not individual tax or legal advice. The treatment of a particular company or transaction depends on its circumstances.