Simplification Of SDC Tax Return Submission

The Cyprus Inland Revenue Department has issued a circular (2011/10) introducing a significant change in practice which will benefit international companies in Cyprus.

Under the so-called "deemed distribution" rules, resident companies which have not distributed at least 70% of their after tax profits attributable to Cyprus-resident shareholders within two years of the end of the year in which the profits were earned are required to pay special defence contribution ("SDC tax") at 20% on the amount by which actual dividends distributed to resident shareholders within the two year period fall short of the 70% threshold. A lower rate of 3% SDC tax is payable by companies operating as collective investment schemes.