The amendments with respect to LTJs will enter into force as from 1 January 2026 while the amendments to the provisions regarding BLJs entered into force on 16 April 2025 where they have been published in the official gazette of the Republic of Cyprus.

On 10 April 2025 the HoR has approved amendments to:

• The Income Tax Law of 2002 (the IT Law)
• The Special Defence Contribution Law of 2002 (the SDC Law)
• The Assessment and Collection of Taxes Law of 1978 (the ACT Law)

The new provisions will be applicable to situations where the person receiving the interest/dividend/royalty income are related companies where their tax residency or place of incorporation or registration is an LTJ and/or a BLJ.

These amendments aim to ensure global tax fairness and transparency. We outline the key amendments below:

The amendments under the IT Law relate to:

• Introduction of a definition of LTJ (section 2 of the IT Law).
• Introduction of the definition of the non-low tax jurisdiction (section 2 of the IT Law).
• Introduction of the definition of the BLJ (section 2 of the IT Law).
• Introduction of a nondeducibility clause (section 11 of the IT Law).
• Introduction of the taxation of IP and similar rights clause (section 21 of the IT Law).
• Introduction of obligations for the renegotiations of treaties (section 34 of the IT Law).

The amendments under the SDC Law relate to:

• Payment of dividends to an entity which is tax resident and/or registered or incorporated in an LTJ would be subject to a 17% special defence contribution tax (SDC) provided that this entity is not considered tax resident in a non-low tax jurisdiction or a non BLJ or incorporated in a BLJ (section 3(2)(a1) of the SDC Law).
• Payment of dividends to a permanent establishment (PE) of an LTJ non-Cypriot entity or of a BLJ would be also subject to a 17% SDC (section 3(2)(a1) of the SDC Law).
• Payment of interest or the crediting of interest from Cyprus sources to an entity which is either registered or incorporated in a jurisdiction which is BLJ and/or to an entity which is not considered tax resident in any other BLJ would be subject to a 17% SDC (section 3(2)(b1) of the SDC Law).
• Payment of interest or the crediting of interest from Cyprus sources to a non-Cypriot’s tax resident entity’s PE in a BLJ would be subject to a 17% SDC (section 3(2)(b1) of the SDC Law).

The amendments under the ACT Law relate to the penalties that would be applicable if the paying entities in Cyprus fail to provide the Cyprus tax authorities with the appropriate documents for the payments of interest, royalties, dividends. In particular:

• A penalty of EUR 2,000 would apply if the Cyprus paying entity fails to comply for the period between 61-90 days (section 50H(1)(a) of the ACT Law);
• A penalty of EUR 4,000 would apply if the Cyprus paying entity fails to comply for the period between 91-120 days (section 50H(1)(b) of the ACT Law);
• A penalty of EUR 10,000 would apply if the Cyprus paying entity fails to comply for the period which exceeds 121 days or complete non-compliance (section 50H(1)(c) of the ACT Law).

For the purposes of addressing tax avoidance issues and arrangements which are not commercially substantial, the amendments of 10 April 2025 provide a General Anti Abuse Rule (GAAR).

Decrees are expected to be issued in Cyprus which will provide more information with respect to the changes in the IT Law, the SDC Law and the anti-abuse measures. These decrees will most likely provide the documents and reporting requirements of the relevant paying entities in Cyprus with respect to the payment of interest, dividends or royalties to LTJs or BLJs.

Every business which has exposure with LTJs or BLJs must take immediate measures in order to comply with the relevant amendments to the Cyprus tax legislation and manage risks efficiently.

The publication within the official gazette of the Republic of Cyprus of 16 April 2025 (available only in Greek) can be found here.