Reduction of SDC for passive interest income to 17%

Written by Demetris Nicolaides
28 December, 2023

On 6 December 2023 the Cyprus parliament voted the reduction of the Special Defence Contribution rate from 30% to 17% for passive interest income.

As a reminder, interest income acquired from the ordinary activities of the business or closely connected with those activities is considered active interest and is regarded as trading income and taxed under Income Tax Law subject to corporation tax at the rate of 12.5%. Active interest income is exempt from special contribution for defence.

Any other type of interest, is considered to be passive interest and is taxed in accordance to Special Contribution for Defence Law at the rate of 30% up to 31 December 2023 and 17% from 1 January 2024 on the gross interest income accrued or credited. Passive interest income is exempt from corporation tax.

The amended law is effective from 1 January 2024.

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