A single settlement window for undistributed company profits at 7.5 percent

Decree Law 45/2026, in force in North Cyprus since 15 April 2026, offers companies a notable opportunity: profits accumulated in the prior year profits account and never distributed to shareholders can now be paid out under a single settlement mechanism with a withholding rate of 7.5 percent.

The scheme covers undistributed profits accumulated through 31 December 2025, in cash or cash equivalent form. Under normal rules, dividend distributions can be taxed at progressive income tax rates between 10 and 37 percent. The 7.5 percent paid under this mechanism is a final tax: the distributed amount is not aggregated with the shareholder's other income.

Applications are filed at the taxpayer's own Tax Office branch using the forms issued by the department, and the tax must be paid in full at the time of application. For foreign currency transactions, the effective selling rate of the TRNC Central Bank on the transaction date applies.

There are points to watch. The tax paid cannot be offset against other tax liabilities, is not refundable and cannot be booked as an expense. Missing the payment deadline or failing to follow the Tax Office procedures forfeits both the settlement right and the tax already paid. Protection covers only amounts actually distributed: profits left undistributed remain open to standard reassessment.

The application window closes on 31 July 2026. Contact us to assess together whether this opportunity makes sense for your company's balance sheet.