Tuesday 24 April 2018
Pelecanos and Pelecanou LLC
Dedalos Corporate and Fiduciary Services
Epias 22

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Double Tax Treaties

One of the main reasons why Cyprus has become a very popular jurisdiction for establishing a base for international business is the availability of a large number of double tax treaties, which number 43 in total.


Many of the well-known offshore tax jurisdictions impose a low or nil income tax on the company profits. However the problem with those jurisdictions is that they do not have double tax treaties. Cyprus offers a full basket of incentives including the low tax on the net profits and the double tax treaties.

Other than the Double Tax Treaties which are presently in force, the conclusion of various other Treaties is pending. These Treaties are currently under negotiation. More over, certain Treaties have already been concluded, however they are pending enforcement.

All Cyprus double tax treaties have been drafted so as to accord very closely to the Organisation in Economic Cooperation and Development (OECD) model Tax treaty. The treaties aim to avoid double taxation of income earned in these countries. This is achieved usually by either exempting the income from tax, by providing a tax credit for the amount of tax paid in other contracting country or by a reduced withholding tax.


Summary of Withholding Tax rates

 

Paid from Cyprus to residents of the
following countries


Paid from the following countries to
residents ofCyprus

 

Dividends
%


Interest
%


Royalties
%**


Dividends
%


Interest
%


Royalties
%


Austria


10


0


0


10


0


0


Belarus


5 (4)


5


5


5 (4)


5


5


Belgium


10 (1)


10


0


10 (1)


10


0


Bulgaria


5(19)


7(25)


10


5 (19)


7(25)


10 (20)


Canada


15


15 (7)


10 (11)


15


15(7)


10 (11)


China


10


10


10


10


10


10


C.I.S. (ex
USSR)***


0


0


0


0


0


0


Czech
Republic


10


10 (8)


5 (14)


10


10 (8)


5 (14)


Denmark


10 (1)


10 (9)


0


10 (1)


10 (9)


0


Egypt


15


15


10


15


15


10


France


0 (2)


10 (9)


0 (27)


10 (2)


10 (9)


0 (27)


Germany


10 (1)


10 (8)


0 (27)


10 (1)


10 (8)


0 (27)


Greece


25


10


0 (12)


25(21)


10


0 (12)


Hungury


0


10 (8)


0


5(1)


10 (8)


0


India


10 (2)


10 (8)


15 (15)


10 (2)


10 (8)


15 (15)


Ireland


0


0


0 (12)


0


0


0 (12)


Italy


0


10


0


15


10


0


Kuwait


10


10 (8)


5 (14)


10


10 (8)


5 (14)


Lebanon


5


5 (16)


0


5


5 (16)


0


Malta


15


10 (8)


10


0 (22)


10 (8)


10


Mauritius


0


0


0


0


0


0


Norway


0


0


0


5 (3)


0


0


Poland


10


10 (8)


5


10


10 (8)


5


Romania


10


10 (8)


5 (14)


10


10 (8)


5 (14)


Russia


5 (6)


0


0


5 (6)


0


0


San Marino

0

0

0

0

0

0


Seychelles

0

0

5

0

0

5


Singapore


0


10 (23)


10


0


10 (23)


10


Slovak
Republic


0


10 (8)


5 (14)


10


10 (8)


5 (14)


South
Africa


0


0


0


0


0


0


Sweden


5(1)


10 (8)


0


5 (1)


10 (8)


0


Syria


0 (1)


10 (8)


10 (13)


0 (1)


10 (8)


10


Thailand


10


10 (17)


5(18)


10


10 (17)


5 (18)


United
Kingdom


0


10


0(27)


0 (24)


10


0 (27)


U.S.A.


0


10 (10)


0


15 (5)


10 (10)


0


Former
Yugoslavia


10


10


10


10


10


10

Note: The number in brackets refers to the following explanatory notes

Explanatory Notes :

  1. 15% if recipient is a company controlling less than 25% of the voting power.
  2. 15% if recipient is a company controlling less than 10% of the voting power
  3. Νil if paid to a company controlling at least 50% of the voting power
  4. This rate applies if the amount invested by the beneficial owner is over ECU 200.000 irrespective of the % of voting power acquired. 10% is imposed if received by a holder of at least 25% of the share capital of the paying company. Otherwise the rate is 15%.
  5. 5 % if received by a company controlling at least 10% of the voting power.
  6. 10% if recipient is a company, which has invested less than US$100.000
  7. Nil if paid to the Government or for export Guarantee.
  8. Nil if paid to the Government of the other state.
  9. Νil if paid to the Government of the other State or in connection with the sale οn credit of any industrial. Commercial or scientific equipment or any merchandise by one enterprise to another or in relation to any form of loan granted by a bank or is guaranteed from government or other governmental organization
  10. Νil if paid to the Government of the other State, to a bank or a financial institution or in respect to debt obligations arising in connection with sale of property or the provision of services.
  11. Nil if royalties are copyright and other literary, dramatic, musical or artistic work not including television programmes.
  12. 5% on film royalties (not including films shown on television)
  13. 10% literary, dramatic, musical or artistic and television royalties.
  14. Nil on literary, artistic or scientific work including films.
  15. 10% on payment of technical fees management fees and consultancy fees.
  16. Νil if paid to the Government of the other State, a political subdivision or a local authority, the National Bank or any institution the capital of which is wholly owned by the State or a political subdivision or a local authority or in the form of interest income from bank deposits.
  17. 10% on interest received from financial institutions, on interest paid in connection with industrial, commercial, scientific equipment or the sale or merchandise between two companies.
  18. 10% on right to use industrial. commercial or scientific equipment or for information concerning industrial, commercial or scientific experience and 15% for patents, trademarks, designs , models, plans , secret formulas or processes
  19. 10% if received by a company, which owns less than 25% of the capital.
  20. This rate does not apply, where 25% or more of the capital of the Cypriot resident is owned directly or indirectly by the Bulgarian resident paying the royalties and the Cyprus company pays less than the normal rate of tax.
  21. The treaty provides for 25%, but the domestic rate of Νil applies since it is lower than the treaty rate.
  22. The treaty provides that the tax on the gross amount of the dividends shall not exceed that chargeable on the profits out of which the dividends are paid.
  23. 7% if paid to a bank or similar financial institution. Νil if paid to the government.
  24. The treaty provides for 15% withholding tax but the local taxation provides for 0% withholding tax.
  25. Νil if paid to or is guaranteed by the government, statutory body, the Central Bank.
  26. Not yet ratified.
  27. 5% on film royalties, including films used for television programs.

* Payments of dividends and interest to non-residents are exempt from withholding tax in Cyprus. Royalties granted for use outside of Cyprus are also free of withholding tax in Cyprus.
** 10% in the case of royalties granted for use within the Republic. 5% on film and TV rights.
*** Armenia, Azerbaitzian, Kyrgyztan, Moldova, Tajikistan, Uzbekistan and Ukraine apply the USSR/Cyprus treaty. The rates shown are those of the treaty Cyprus/USSR.

By Ioannides - Demetriou Law Offices

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