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New Laws voted by the Cyprus Parliament
New Law was enacted governing the provision of fiduciary and corporate services

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Special Defence Contribution (SDC) on Rental Income – withholding procedure
Thursday, September 15, 2011

As from 1 July 2011, companies, partnerships, the Government or any local authorities that pay rents are required to withhold SDC at source at the rate of 3% on 75% of the amount of the rent. That is 2,25% on the gross rent.

The new provisions relate to rental periods from 1 July 2011 whereby the rent is paid after 1 July 2011.



  1. Tenant obligations

SDC is withheld by the tenant on the date of the payment of the rent to the landlord.

The SDC withheld is paid by the tenant to the ITO by the end of the following month from the date of the withholding. Form IR601A “payment of defence contribution withheld and self-assessment of income subject to defence” has been issued by the ITO to facilitate this payment.

Strict compliance to the withholding provision is strongly advised. Failure to comply results to interest and penalties imposed on tenants.

From tax year 2011 onwards, tenants are required to submit with their annual tax declaration

(Company / partnership tax declaration as applicable) a list of the landlords for which SDC was withheld.

At the end of the six months period (on 30 June and 31 December) the tenant should provide the landlord form IR614A rec “Confirmation of withholding of special contribution for defence from rents” stating the monthly SDC withheld.

The Commissioner of Income Tax has the right to collect the SDC withheld from the tenant but is not limited to collect from the landlord in case the tenant has not withheld the SDC.



  1. Landlord obligations

On receipt of the confirmation of SDC withheld by the tenant (form IR614A rec), the landlord must ensure that the SDC withheld is correct. Any additional SDC due must be paid by the landlord by self-assessment on 30 June and 31 December by filing form IR601A. Form IR601A is also used to make SDC payments on rentals which are not subject to withholding tax. Landlords should keep form IR614A rec as proof of withheld by the tenants and for use time of preparation and submission annual tax return.

Strict compliance to the procedure is strongly advised. Failure to comply results to imposition of interest and penalties



  1. Rent paid to non-residents

In relation to rental paid to non-residents there is no obligation to withhold SDC provided that the tenant has received the following documents:


  1. Questionnaire for ascertaining whether conditions relating to the term “Non-Cyprus Resident” are met for the year. (IR 614A Q)– to be completed every year.


  1. Declaration for exemption from the deduction of Defence Contribution (IR 614A Declaration) – completed once. In case the landlord becomes Cyprus tax resident he is required to inform the tenant accordingly.

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