Amendments to the special defence contribution – Taxation of interest – 8 June 2022

May 21, 2022

Amendments to the Special Contribution for the Defence Law were published in the Cyprus Government Gazette on 8 June 2022 in respect to the taxpayers eligible for the 3% taxation on interest accrued from savings certificates and bonds issued by the Cypriot Government as well as from corporate bonds.

Prior to the amendments the provision was not available to companies or corporate bodies, or other types of retirement funds apart from Provident Funds or state organisations.

Under the Law amendments, with effect from 8 June 2022:

(i) Both individuals and companies can benefit from the reduced rate of 3% on interest income received or credited from:

  • Savings certificates of the Republic of Cyprus
  • Development stocks of the Republic of Cyprus
  • Corporate bonds listed in recognised stock – exchange
  • Bonds or securities listed in a recognised stock exchange issued by a local authority or state organisation.

(ii) Further, local authorities or state organisations are also taxed at the rate of 3% for interest received.

The rate of 3% is available to the aforementioned taxpayers in paragraphs (i) and (ii) to the extent where such interest does not accrue from the ordinary carrying on of their business, or is closely connected with the ordinary carrying on of their business.

  • (iii) Pension Funds, Provident Funds and the Social Insurance Fund are taxed at the rate of 3% on interest received or credited without any conditions.