The Cyprus Parliament approved on 6 December 2023 an amendment to the Special Defence Contribution (‘SDC’) Law, through which the SDC rate on passive interest income earned by Cypriot tax residents (individuals and companies) is reduced from 30% to 17%.

The amendment was published in the official Cyprus Government Gazette on 20 December 2023 and comes into force on 1 January 2024.

It is being reminded that the SDC rate was increased from 15% to 30% during the year 2013, as part of several temporary economic measures at the time.

The amendment serves to rectify the discrepancy that existed on the taxability of passive interest compared to dividends (which are taxed under SDC at 17%).

This is a positive and welcome development that is expected to contribute to the reduction of the tax burden of Cypriot taxpayers.