Taxation of dividend income arising from hybrid instruments
Dividends payment were in certain cases treated as tax deductible dividend paying company due to classification of the instrument as hybrid one (i.e. preference share capital). Also previously, any dividends received were unconditionally exempt from income tax in Cyprus. After the amendment, this unconditional exemption from income tax on dividends received will not be available as of 1 January 2016 provided that such dividends are deductible from the taxable income of the dividend paying company. Then such dividends should be subject to corporate income tax at the rate of 12.50%. In this case the dividends should not be subject to the Special Defence Contribution.
This amendment comes into force as from 1 January 2016.
On 10th of December 2015, the House of Representatives voted a number of significant tax law amendments that were published in the Government Gazette on 17 December 2015.