Cyprus Double tax treaties

CYPRUS - Double tax treaties with 34countries
Introduction

Russia | Poland | Romania | Hungary | Ireland | Greece | Czech Rep | India | Sweden

Cyprus differs from most other offshore jurisdictions, in that it offers a big number of double tax treaties (34 in total), for the avoidance of double taxation. In general most of the conventions provide reduced rates of withholding taxes on dividends, interest and royalties paid out of the contracting state, or the avoidance of double taxation in the case where a resident in one of the contracting states derives income from the other contracting state. This is one of the key areas which makes Cyprus as an International and Offshore Business Centre unique and respectable.

In view of the recent developments, and the emergence of new states from countries which Cyprus had in place double tax treaties, most of the emerging new states have adopted the old treaties in place. Czech Republic and Slovakia have adopted the
old treaty with Czechoslovakia, all the ex-Yugoslav republics have adopted the treaty with Yugoslavia, and all CIS states have adopted the old treaty with Russia, with the exception of Azerbaijan, Kazakhstan and Turkmenistan. Russia and Belarus concluded new revised treaties in 1998, which come into effect from the 1st of January 2000.

• Treaty with Russia (old)
• Treaty with Russia (new)
• Treaty with Poland
• Treaty with Romania
• Treaty with Hungary
• Treaty with Ireland
• Treaty with Greece
• Treaty with the Czech Republic
• Treaty with India
• Treaty with Sweden

Treaties may change at any time. Before you place reliance on the treaty guidelines, please ask Kyriakides, Savvides and Associates for professional advice.

Double tax treaties

Cyprus is a tax incentive country offering unique opportunities for international tax planning, due to its favourable tax regime and its wide network of double tax treaties. The primary objective of these treaties is to avoid the double taxation of income earned in any of the two contracting countries. IBC, (Offshore companies) may under conditions considered residents of Cyprus for the purposes of the double tax treaties, thus they are eligible
to claim relief under the treaties. Usually, due to the treaties, there are much lower rates on withholding tax applicable to dividends, royalties and interest.

Cyprus has concluded an impressive number of double tax treaties, something which tax havens lack in almost all cases. The following treaties are currently in force:

The treaty with Belgium has been signed and is awaiting ratification. Treaties with Norway, Singapore, South Africa, Finland and Thailand are under negotiation.

The following table, summarizes the withholding tax rates applicable for dividends, interest and royalties paid from the countries shown to residents of Cyprus (for numbers in parenthesis (n) refer to the notes below):

Notes to the table above:

1. Nil if paid to the Government of the other State or for export guarantee
2. Nil on literary, dramatic, musical or artistic work
3. Nil for literary, artistic or scientific work, film and TV royalties
4. Nil if paid to the Government of the other State
5. 15% if received by a company holding directly less than 25% of the capital
6. Nil if paid to the Government of the other State, or in respect of bank loans, or in connection with the sale on credit of any industrial commercial or scientific equipment or any merchandise
7. 15% if received by a company holding directly less than10% of the capital
8. 5% on film and TV royalties
9. 15% if received by a company holding directly less than 25% of the capital of the paying company. However, if German corporation tax on distributed profits is lower than that on undistributed profits and the difference between the two rates is 15% or more, the withholding tax is increased from 10% to 27%. In all other cases the withholding tax is15%.
10. As a result of changes in local legislation, there is no withholding tax on payments of dividends and interest to foreigners thus the rates provided in the treaty would not apply in practice
11. 5% on film royalties
12. 15% if received by a company holding directly less than 25% of the capital
13. 5% if received by a company holding directly less than 50% of the voting power
14. if received by a company controlling less than 10% of the voting power thus entitled to a refund of Advanced Corporation Tax in the UK. If company controls more than 10% of the voting power it is not entitled the refund
15. 5% if received by a company controlling 10% or more of the voting power.
16. Nil if paid to the Government of the other State, banks or financial institutions
17. 10% on literary artistic or scientific work, film and TV royalties
18. 5% if received by a company that has directly invested in the capital of the paying company not less than the equivalent of 100.000 US dollars.
19.   5% if received by a company holding directly of least 25% of the share capital.
20. Nil if received by a company holding directly more than 25% of the Capital.
21. 10% on literary, artistic or scientific work including cinematograph films and films of tapes for television or radio broadcasting.
22. 10% if paid to financial institution (including an insurance company) or if paid in connection with the sale on credit of any industrial, commercial or scientific equipment, or if paid in connection with the sale on credit of any merchandise by one enterprise to another enterprise.
23. 5% for literary, dramatic, musical, artistic or scientific work, including software, cinematograph films or films or tapes used for radio or televisions broadcasting.
24. 10% for industrial, commercial or scientific equipment.
25. 10% if received by a company holding directly at least 25% of the share capital.
26. 5% if received by a company that invested in share capital not less than € 200.000.
27. 7% if received by a bank or similar financial institution.