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Reduction of Special Defence Contribution for Passive Interest Income to 17%

On 6 December 2023 the Cyprus parliament voted in favour of reducing the Special Defence Contribution (‘SDC’) rate from 30% to 17% for passive interest income.

The amendment was published in the official Cyprus Government Gazette on 20 December 2023 and is effective as from 1 January 2024.

Active interest income derived from the ordinary carrying on of a business or closely connected with the ordinary carrying on of a business is not considered as passive interest and therefore it does not fall within the provisions of the Special Contribution for Defence law. Such interest income is subject to the provisions of the income tax legislation.

When interest income is considered to be ‘passive’, then, instead of being subject to Cyprus Income Tax, it is subject to Special Defence Contribution (without expense deduction). The Special Defence Contribution rate has now been reduced to 17%.

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