Cyprus pension reform to make dividend income count toward social insurance
Business owners and shareholders who declare low salaries but take dividends would pay social insurance on part of those payouts under a draft pension reform.
Cyprus plans to widen the social insurance base so that company owners, directors and shareholders who take dividends while declaring modest salaries contribute on some of that dividend income. The draft pension reform, first reported by Philenews, is meant to lift state revenue and bring contributions closer to actual earnings.
Labour Ministry figures cited in the report show 2,990 owners, directors and shareholders in firms with up to three people declaring monthly salaries under €500 while also receiving dividends. In total, 11,500 such people declare up to €2,000 a month, and 26 per cent report salaries below €500.
Under the proposal, dividends from a company where a person also works would be added to the contribution calculation until annual earnings reach a ceiling of two insurance units, or €22,960 — based on basic insurable earnings of €11,480 set for 2025 and 2026. The bill also creates an "income earners" category covering dividends, interest, rents, royalties, fees and other property profits.
What it means for residents
If you run a small company or hold shares where you work, your social insurance bill may no longer be based on salary alone. The change is designed to tie future pensions more closely to real income and reduce reliance on welfare top-ups, but it also means higher contributions for some.
- Check your mix of salary and dividends — contributions would be calculated on salary first, then on dividends up to the annual ceiling.
- Small firms are in focus — owners and directors in businesses with up to three people are the group most often declaring very low pay.
- Watch the "income earners" category — rental, interest and royalty income could eventually fall inside the social insurance system.
This text is written from the source article and is not a translation of it.
