On 8 June 2022, amendments to the Special Contribution for the Defence Law were published in the Cyprus Government Gazette ("Law amendments") amending the range of taxpayers eligible for 3% taxation on interest accrued from savings certificates and bonds issued by the Cypriot Government as well as from corporate bonds. The Law amendments also provide further clarifications on the same matter.

Until now, "every individual who is resident in the Republic for interest received or credit from savings certificates of the Republic of Cyprus, corporate bonds, development stocks of the Republic of Cyprus, as well as interest received or credit by a Provident Fund or the Social Insurance Fund" was taxed under the Special Defence Contribution at the rate of 3%.

Prior to the amendments the provision was not available to companies or corporate bodies, or other types of retirement funds apart from Provident Funds or state organisations.

Under the Law amendments, with effect from 8 June 2022:

(i) Both individuals and companies can benefit from the reduced rate of 3% on interest income received or credited from:

  • Savings certificates of the Republic of Cyprus
  • Development stocks of the Republic of Cyprus
  • Corporate bonds listed in recognised stock – exchange,
  • Bonds or securities listed in a recognised stock exchange issued by a local authority or state organisation.

(ii) Further, local authorities or state organisations are also taxed at the rate of 3% for interest received or credited to them.

The rate of 3% is available to the aforementioned taxpayers in paragraphs (i) and (ii) to the extent where such interest does not accrue from the ordinary carrying on of their business, or is closely connected with the ordinary carrying on of their business.

(iii) Pension Funds, Provident Funds and the Social Insurance Fund are taxed at the rate of 3% on interest received or credited without any conditions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.