In a significant move to broaden the social security funding base, Cyprus has unveiled a new proposal to impose social contributions on a portion of dividend income for shareholders. This initiative aims to align Cyprus’ social contributions framework with evolving EU regulations and contemporary fiscal policies. Under the proposed legislation, dividends exceeding a specified threshold would be subject to social security contributions, signaling a shift from traditional practices where dividend income remained exempt from such charges. Authorities emphasize that this measure targets enhancing the sustainability of the social insurance system while maintaining an attractive environment for investors.

Key aspects of the proposal include:

  • Application of a defined contribution rate on dividends exceeding €3,000 per fiscal year.
  • Exemptions for dividends stemming from family-owned businesses under certain criteria.
  • Introduction of…