On January 9, 2024, the Cyprus Parliament formally endorsed an amendment to the Special Defence Contribution Law, ratified on December 6, 2023. This amendment pertains to the reduction of the special contribution for defense rate on passive interest income earned by Cypriot tax residents, encompassing both individuals and companies. The revised rate now stands at 17%, down from the previous 30%.
Published in the official Cyprus Government Gazette on December 20, 2023, this amendment holds effect as of January 1, 2024.
It is essential to note that active interest income arising from the routine conduct of a business or closely associated with such operations is not categorized as passive interest. Consequently, it falls outside the scope of the provisions outlined in the special contribution for defense law. Instead, this type of interest income is subject to the stipulations articulated in the income tax legislation.
