4 NEW CYPRUS DOUBLE TAXATION TREATIES ENTER INTO FORCE WITH EFFECT FROM 1 JANUARY 2014

In line with the OECD Model Convention, four new Double Taxation Treaties (DTT) have  come into force with effect from 1st of January 2014, between Cyprus and the following countries:

1. DTT between Cyprus and Ukraine 

The new DTT between Cyprus and Ukraine replaces the old DTT between Cyprus and the USSR. The main provisions of the new DTT agreement are as follows:

Permanent Establishment – The permanent establishment definition included in the DTT  is in line with the definition provided in the OECD model tax convention.

Dividends
– Withholding tax of 5%, provided the company receiving the dividend owns at  least 20% of the share capital of the company paying the dividend or has invested an  amount of at least €100.000. Otherwise, it will be 15%.

Interest – 2% withholding tax.

Royalties – 5% withholding tax.

Capital gains
– Cyprus retains the exclusive taxing right on disposals of Ukrainian shares  by Cyprus tax residents (no ‘property rich companies’ condition).

2. DTT between Cyprus and Finland

The main provisions of the new DTT are as follows:

Permanent establishment – The permanent establishment definition included in the DTT follows the definition provided in the OECD model tax convention.

Dividends – Withholding tax of 5%, provided a holding of 10% of the voting power in the paying company or 15% in all other cases.

Interest – No withholding tax.

Royalties – No withholding tax.

Capital gains
– Cyprus retains the exclusive taxing right on disposals of shares in Finnish companies, except when the disposed shares derive more than 50% of their value from immovable property situated in Finland.

3. DTT between Cyprus and Estonia

The main provisions of the new DTT are as follows:

Permanent establishment
– The permanent establishment definition included in the DTT is in line with the definition provided in the OECD model tax convention.

Dividends – No withholding tax

Interest – No withholding tax

Royalties – No withholding tax

Capital gains
– Cyprus retains the exclusive taxing right on disposals of shares in Estonian companies except when the disposed-of shares derive more than 50% of their value from the immovable property situated in Estonia.

 4. DTA between Cyprus and Portugal

The main provisions of the new DTT are as follows:

Permanent establishment
– The permanent establishment definition included in the DTT is in line with the definition provided in the OECD model tax convention.

Dividends – 10% withholding tax.

Interest – 10% withholding tax.

Royalties – 10% withholding tax.

Capital gains
– Cyprus retains the exclusive taxing right on disposals of shares in Portuguese companies except when the disposed-of shares derive more than 50% of their value from the immovable property situated in Portugal.

Irrespective of the withholding tax rates provided by the above new DTTs, Cyprus does not apply any withholding tax on dividend, interest and royalty payments out of Cyprus, as per the provisions of the local tax legislation.

Needless to say that our tax team is available to advise you on the above issues / discuss the above developments and how they might affect your business and thus ensure that you are in compliance with the aforementioned requirements if needed.

4 NEW CYPRUS DOUBLE TAXATION TREATIES ENTER INTO FORCE WITH EFFECT FROM 1 JANUARY 2014 by
Christophoros Christophi
About the Author
Christophoros Christophi

Lawyer and Managing Partner of Christophi & Associates LLC, Lecturer (Company Law) at the European University of Nicosia.
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