Cyprus Double tax treaties

CYPRUS - Double tax treaties with 34 countries
Treaty with Czech Republic

The treaty concluded between Cyprus and the Czech Republic applies in the case of Cyprus IBCs (offshore companies) with no restrictions.

The treaty provides:

• elimination of double taxation in Czech Republic is mostly by way of tax credit
• there are reduced withholding taxes for dividends, interest and royalties
• there are tax sparing provisions in Czech Republic for tax not imposed by Cyprus because of tax incentives in Cyprus (profits, dividends and interest)
• there are provisions for giving credit for underlying tax on dividends
• capital gains from the sale of shares in Czech companies are taxed in Cyprus only

Example 1- Royalties from the Czech Republic using a Cyprus offshore company in comparison with a non-treaty country

The following example compares the tax position of a company receiving royalties from the Czech Republic, using Cyprus, with the case of receiving royalties directly, in the absence of a double tax treaty with the Czech Republic.

	Using Cyprus	Directly
Royalties	10,000	10,000
Withholding tax	(500)	(2,500)
Net Royalties	9,500	7,500

- No further tax in Cyprus because of the tax credit for the Czech tax against the Cypriot tax of 10%, thus there is a tax saving of 20%

Example 2- No capital gain on the sale of shares of Czech companies

Cyprus IBCs (offshore companies) have been used to hold investments in Czech Republic companies, because there is no tax in Czech Republic on the disposal of the invested shares, and if these shares are held for investment purposes, there is no
tax in Cyprus.

Any dividends received from the investments in Czech Republic companies, suffer withholding tax at the rate of 10%. No further taxes are levied on the dividends, because of tax credit on dividends.