Cyprus Double Tax Treaties Which Have Been Signed and Await Ratification

Cyprus Double Tax Treaties Which Have Been Signed and Await Ratification

The double tax treaties with Luxembourg and Barbados have been signed and they are awaiting ratification, according to Baker Tilly Cyprus. Assuming the ratification process is completed by both countries before the end of 2017, the treaties are expected to enter into force and come into effect as from 1st January 2018.

Luxembourg

The double tax treaty with Luxembourg has been signed and it is awaiting ratification. Assuming the ratification process is completed by both countries before the end of 2017, the treaty is expected to enter into force and come into effect as from 1st January 2018.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications.

The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Luxembourg, the treaty covers the income tax, the corporation tax, the capital tax and the communal trade tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The treaty provides for withholding taxes only on dividends at the following rates:

•  0% in case where there is at least 10% participation by a tax resident company
  •    5% in all other cases

There is no withholding tax on interest. There is no withholding tax on royalties, as long as the recipient of the royalties is the beneficial owner of the income.

Gains from the sale of shares of immovable property rich companies are taxed in the country where the immovable property is located.

Barbados

The double tax treaty with Barbados has been signed and it is awaiting ratification. Assuming the ratification process is completed by both countries before the end of 2017, the treaty is expected to enter into force and come into effect as from 1st January 2018.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications.

The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Barbados, the treaty covers the income tax and corporation tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

There is no withholding tax on dividends, interest and royalty payments.

Capital gains arising from the sale of shares of a company are taxable only in the state where the seller is tax resident. This provision also covers the tax treatment of sales relating to shares of immovable property-rich companies.