Amendments to the Special Contribution for Defence Law were published in the Cyprus Government Gazette on June 8, 2022 ("Law amendments"), expanding the range of taxpayers eligible for 3 percent taxation on interest accrued from Cypriot Government savings certificates and bonds, along with corporate bonds. The amendments to the law also provide additional clarification on the subject.
Previously, "every person who is resident in the Republic for credit or interest received from Republic of Cyprus savings certificates, corporate bonds, Republic of Cyprus development stocks, along with the credit or interest received by a Provident Fund or the Social Insurance Fund" was taxed at a rate of 3% under the Special Defence Contribution.
Before the amendments, companies or corporate bodies, as well as other types of retirement funds other than Provident Funds or state organisations, were not eligible for the provision.
The following changes to the law will take effect on June 8, 2022:
(i) Both companies, as well as individuals, can benefit from the reduced rate of 3 percent on interest income received or credited from:
- Securities or bonds are listed in a recognised stock exchange issued by a state organisation or local authority.
- Corporate bonds listed in recognised stock – exchange
- Development stocks of the Republic of Cyprus
- Savings certificates of the Republic of Cyprus
(ii) In addition, state organisations or local authorities are also taxed at the rate of 3 percent for interest that is received or credited to them.
In paragraphs (i) and (ii), the 3 percent rate is available to the above-mentioned taxpayers to the extent that such type of interest does not accrue from the ordinary carrying on of their business or is closely related to the ordinary carrying on of their enterprise or business.
(iii) Provident Funds, Pension Funds as well as the Social Insurance Fund are taxed at the 3 percent rate on interest that is received or credited without any type of conditions