Special Contribution for Defence Tax

Special Contribution for defence tax applies to dividend income, interest income and rental income for Cyprus tax resident and domicile individuals.


Rental Income after 25% deduction3%3% (Note 1)
Dividend Income from Cyprus resident companies17%Exempt (Note 2)
Dividend Income from non- Cyprus resident companies17%Exempt (Note 3)
Interest Income (Note 4)30%30%
Interest Income earned by individuals from Government development bonds and Government saving bonds3%n/a
Interest Income earned by individuals when their income does not exceed €12.0003%n/a
Interest Income earned by Provident Funds3%3%


  1. When the tenant is an entity (such as company, partnership, the state or local authority) then is obliged to withhold the Special Contribution for Defense and General Health Scheme Contribution if applicable and arrange to pay this tax on the owner behalf.
  2. Dividends declared by a Cyprus tax resident company to another Cyprus tax resident company after two layers structure are subject to Special Contribution for Defense at the rate of 17%.
  3. Dividends received from non – Cyprus resident companies which are deductible for tax purposes by the paying company, are subject to Corporation Tax. When this section applies, the exemption from Special Contribution for Defense does not apply if: -more than 50% of the paying company’s activities result in investment income and, – the foreign tax is significantly lower than the tax burden in Cyprus (below 6.5% on the distributed profit).
  4. Any interest income from arising from the ordinary activities or is closely related to the ordinary activities is not subject to special defence contribution.