Passive Income Taxation

INTEREST INCOME

With interest rates increasing in the last couple of years, tax on interest earned on deposits has become more relevant to depositors than before when the interest rates were near zero or even negative. The reduction introduced by the Government of Cyprus in the Special Defence Contribution (“SDC”) Law with effect as of 1 January 2024, brought the SDC tax rate on interest from 30% down to 17%.

Interest received by individuals or legal entities who are tax resident in Cyprus from savings certificates and development bonds of the Republic of Cyprus, corporate bonds listed on a recognised stock exchange, as well as or bonds listed on a recognised stock exchange that are issued by a local authority or a state organisation, or from an approved provident fund or social insurance fund, continue to be subject to the SDC reduced rate of 3%.