MT Audit would like to remind of the obligations that arise from the Deemed Dividend Distribution (DDD) provisions that apply on 31 December 2020.
The scope of DDD provisions
The DDD provisions apply to the profits of Cyprus tax resident companies that are ultimately attributable to shareholders that are Cyprus tax residents and Cyprus domiciled individuals.
When DDD provisions apply?
The DDD provisions apply where a Cyprus tax resident company has not distributed at least 70% of its profits after tax within two years from the end of the tax year to which such profits relate.
I.e., if a Cyprus tax resident company had accounting profits after tax for the tax year 2018 and has not distributed at least 70% of such profits as dividends to its Cyprus tax resident shareholders by 31 December 2020, then the relevant undistributed profits (up to the 70% threshold) would be considered as deemed distributed and subject to the relevant SDC and/or GHS contributions.
SDC and GHS Rates
Under the DDD provisions, the eligible profits as outlined above are subject to:
– 17% Special Defence Contribution (SDC) for Cyprus tax resident individuals and domiciled Shareholders, and/or
– 2,65% General Healthcare Scheme Contributions (GHS) for all tax resident individual shareholders, whether domicile or non-domicile.
Deadline for SDC and GHS Payments
The SDC and/or GHS contributions on deemed dividends should be paid until 31 January 2021 via JCC Smart portal or online banking.
Penalties for late payment
Late payment of the SDC and GHS due will be subject to interest at the current rate of 1,75% per annum and to a 5% penalty on the tax due. An additional penalty of 5% on the tax due may be imposed if the tax remains unpaid two months after the above due dates.
MT Audit specialists remain at your disposal for any relevant calculations, administration of payments or other assistance. Please feel free to contact us for any questions or clarifications.
