Cyprus Double tax treaties

CYPRUS - Double tax treaties with 34 countries
Treaty with Greece

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

The treaty provides:

• elimination of double taxation in Greece by way of tax credit
• there are reduced withholding taxes for dividends, interest and royalties
• there are tax sparing provisions in Greece 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 Greek companies are taxed in Cyprus only

Example 1 - A Cyprus IBCs (offshore company) , which receives dividends from Greek companies

A Cyprus IBC (offshore company) invests in Greek securities. When the Cyprus Company receives dividends, no withholding tax is paid because of Greek domestic legislation, which does not impose any withholding tax on dividends. In Cyprus, the IBC (offshore company) does not pay any tax, because dividends are exempt from taxation but there is 15% defense tax payable under certain conditions.

Example 2 - Investing in Bulgaria by a Greek resident through Cyprus

There is no treaty between Greece and Bulgaria. The treaty between Cyprus and Bulgaria however, provides for no withholding tax on dividends, interest and royalties.

A Greek investor wishing to invest in Bulgaria, may do so through a Cyprus IBC (offshore company), which in turn establishes a wholly owned subsidiary in Bulgaria.

The dividends from the Bulgarian company will be paid to the Cyprus holding company, without any withholding tax. The Cyprus holding company will pay tax at the rate of 10% and will distribute its profits to the Greek investor without any withholding taxes.

These dividends will be taxed in Greece, however a tax credit will be given for the underlying tax on the profits. The tax credit may range from 20% to 25%, even though the actual tax paid is at 10%, due to a tax sparing credit provided for in the double tax treaty between Cyprus and Greece.