As we approach the close of 2023, Cyprus tax resident companies must remain vigilant regarding the Deemed Dividend Distribution (DDD) provisions under the Special Contribution for Defence Law (SDC).
This article provides insights into key aspects of DDD provisions, payment deadlines, and reporting obligations to ensure compliance and avoid penalties.
Understanding Deemed Dividend Distribution (DDD) Provisions:
DDD applies to profits of Cyprus tax resident companies linked to Cyprus tax resident and domiciled shareholders. Notably, these provisions exclude profits associated with non-Cyprus tax resident and/or Cyprus tax resident non-domiciled shareholders. GHS contributions are mandatory for DDD attributable to Cyprus tax resident non-domiciled shareholders. Companies fall under DDD if they fail to distribute 70% of after-tax accounting profits within two years, subjecting the undistributed portion to SDC at 17% for Cyprus tax resident domiciled shareholders.
GHS Contributions:
In addition to SDC, deemed dividends to Cyprus tax resident individuals may incur General Healthcare Scheme (GHS) contributions at a rate of 2.65%.
Payment Deadlines:
For SDC and GHS contributions on DDD as of December 31, 2023, the payment deadline is January 31, 2024. Payments can be made via JCC Smart or online banking. Late payments, accepted only online, incur a 2.25% per annum interest rate and a 5% penalty on the tax due. An additional 5% penalty may be imposed if the tax remains unpaid two months after the due dates.
Tax Return Submission Deadline:
To meet reporting obligations, companies with DDD as of December 31, 2023, and SDC and GHS liability must submit “Declaration of withheld Special Contribution for Defence (SDC) and General Healthcare Scheme (GHS) from Dividends” (Form T.D.603) via Taxisnet by January 31, 2024. Late submissions incur a fixed penalty of €100.
Conclusion:
Compliance with DDD provisions and associated tax obligations is crucial for Cyprus tax resident companies. Failure to meet payment deadlines and reporting obligations may result in penalties. For further information or clarifications, feel free to contact us. Stay informed and proactive to navigate the regulatory landscape effectively.
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