Cyprus has a wide and expanding network of double taxation agreements. Agreements
for the avoidance of double taxation are currently in force with the following countries:
(click country name for brief explanation)
The main purpose of these agreements is the
avoidance of double taxation of income earned in any of the two contracting States. Under
these agreements, either (1) a credit is allowed in a contracting state in respect of tax
levied by the other State on the same income or (2) income taxed in one contracting State
is exempt from tax in the other contracting State. Thus, the taxpayer does not pay more
than the higher of the two rates of tax or he is not taxed twice on the same income.
A corporation or individual resident in one State may be
liable to taxation in the other State by reason of being resident also of the other State
or by receiving income emanating from that other State.
Corporations are usually considered resident of the State
of their incorporation unless they maintain a permanent establishment in the other State,
in which case profits attributable to such permanent establishment may be taxable in the
other State.
The OECD model treaty definition of permanent
establishment includes a place of management, a branch, an office, a factory, a workshop,
a mine, an oil or gas well and a building site, construction installation or assembly
project which lasts more than twelve months.
AUSTRIA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts more than twenty-four months.
Relief from double taxation
Both countries grant full exemption to income taxed in the other country, other than
dividends. These are taxable and a tax credit is given for the tax paid in the other
country. Exempt income is added to the other income of the taxpayer in order to arrive at
the rate of tax which will be applied on the income to be taxed in the country.
Withholding taxes
| Dividends |
10% |
| Interest |
Nil |
| Royalties |
Nil |
Tax sparing credits
In Austria, there are tax sparing provisions if the Cyprus tax which would have been
payable on dividends is reduced to below 15% for the promotion of industrial development.
Austria will grant a tax credit of 15%.
Date of entry into force
11 October 1990
BULGARIA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly activity is considered a permanent establishment if
it lasts more than eighteen months.
Relief from double taxation
In Cyprus, relief is given in the form of a tax credit.
In Bulgaria, the exemption method is basically applied.
Withholding taxes
| Dividends |
Nil |
| Interest |
Nil |
| Royalties |
Nil |
Date of entry into force
27 August 1986
CANADA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts more than six months.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% |
| Interest |
15% (Nil if paid to the Government or for export credit guarantee) |
| Royalties |
10% (Nil for literary, dramatic, musical or artistic work) |
Tax sparing credits
In Canada, there are tax sparing provisions in respect of interest exempted from
Cyprus tax for the purpose of promoting development in Cyprus and investment allowances in
respect of certain tourist, industrial, engineering and similar investments.
Special anti-avoidance provisions
Cyprus offshore companies are excluded from obtaining relief under the treaty.
Date of entry into force
3 September, 1985
CHINA
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In Cyprus, income taxed in China is exempt from Cyprus tax.
In China, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
10% |
| Interest |
10% |
| Royalties |
10% |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of income exempted from
tax for the purpose of promoting development in the respective country, to the extent of
10%.
Date of entry into force
5 October 1991
CZECHOSLOVAKIA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that
a construction, installation or assembly project is considered a permanent
establishment if it lasts more than six months.
Relief from double taxation
In Cyprus, relief is given in the form of a tax credit.
Czechoslovakia grants tax exemption to income taxed in
Cyprus, other than dividends, interest, royalties, directors’ fees and artists’
and athletes’ fees. These are taxable in Czechoslovakia, but a tax credit is given
for the tax paid in Cyprus. Exempt income is added to the other income of the taxpayer in
Czechoslovakia in order to arrive at the rate of tax which will be applied on the income
to be taxed in Czechoslovakia.
Withholding taxes
| Dividends |
Nil |
| Interest |
10% (Nil if paid to the Government) |
| Royalties |
Nil (5% on patents and trademarks) |
Tax sparing credits
In Czechoslovakia, there are tax sparing credit provisions in respect of Cyprus tax
which would have been payable on profits and interest in Cyprus but for tax incentive
exemption or relief in Cyprus, and in respect of Cyprus tax which would have been
deductible from any dividend paid out of profits granted such incentive exemption or
relief in Cyprus but for such incentive exemption or relief.
Date of entry into force
30 December 1980
DENMARK
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts more than six months.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% (10% if received
by a company holding directly 25% or more of the capital) |
| Interest |
10% (Nil if paid to the Government or in respect of bank
loans or in connection with the sale on credit of any industrial, commercial or scientific
equipment or any merchandise) |
| Royalties |
Nil |
Tax sparing credits
In Denmark, there are tax sparing provisions in respect of dividends (15%) and
interest (10%) exempted from Cyprus tax for the purpose of promoting development in
Cyprus.
Date of entry into force
10 August 1981
EGYPT
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment irrespective of the duration of the project.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% |
| Interest |
15% |
| Royalties |
10% |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of tax reduced or
waived as a tax incentive.
Date of entry into force
14 March 1995
FRANCE
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% (10% if received by a company holding directly 10% or
more of the capital) |
| Interest |
10% (Nil if paid to the Government or in respect of bank
loans or in connection with the sale on credit of any industrial, commercial or scientific
equipment or any merchandise) |
| Royalties |
Nil (5% on film and tv royalties) |
Tax sparing credits
In France, there are tax sparing provisions in respect of interest exempted from
Cyprus tax for the purpose of promoting development in Cyprus and investment allowances in
respect of certain tourist, industrial, engineering and similar investments.
Special anti-avoidance provisions
Cyprus offshore companies are excluded from obtaining relief under the treaty in
respect of dividends, interest and royalties arising in France
Date of entry into force
1 March 1983
GERMANY
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts more than six months.
Relief from double taxation
In Cyprus, relief is given in the form of a tax credit.
Germany grants tax exemption to income taxed in Cyprus, other than dividends, interest,
royalties, directors’ fees and artists’ and athletes’ fees. These are
taxable in Germany, but a tax credit is given for the tax paid in Cyprus. Exempt income is
added to the other income of the taxpayer in Germany in order to arrive at the rate of tax
which will be applied on the income to be taxed in Germany.
Withholding taxes
| Dividends |
15% (10% if received by a company holding directly 25% or
more of the capital) |
| Interest |
10% (Nil if paid to the Government ) |
| Royalties |
10% (Nil if paid to the Government ) |
Tax sparing credits
In Germany, there are tax sparing provisions in respect of dividends (15%) and
interest (10) exempted from Cyprus tax for the purpose of promoting development in Cyprus.
Date of entry into force
11 October 1977
GREECE
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment irrespective of the duration of the project.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
25% |
| Interest |
10% |
| Royalties |
Nil (5% on film royalties) |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of profits, dividends
and interest exempted from tax as a tax incentive.
Date of entry into force
16 January 1969
HUNGARY
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In Cyprus, relief is given in the form of a tax credit.
Hungary grants full exemption to income taxed in Cyprus, other than dividends and
interest. These are taxable in Hungary and a tax credit is given for the tax paid in
Cyprus. Exempt income is added to the other income of the taxpayer in Hungary in order to
arrive at the rate of tax which will be applied on the income to be taxed in Hungary.
Withholding taxes
| Dividends |
Paid from Cyprus |
Nil |
|
Paid from Hungary |
15% (5% if the recipient is a company which holds
directly at least 25% of the capital) |
| Interest |
10% (Nil if paid to the Government) |
| Royalties |
Nil |
Date of entry into force
24 November 1982
INDIA
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation In both countries,
relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% (10% if received by a company holding at least 10% of
the share capital) |
| Interest |
10% |
| Royalties |
15% |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of tax on dividends,
interest and royalties exempted from tax in order to promote economic development.
Date of entry into force
21 December 1994
IRELAND
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment irrespective of the duration of the project.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Nil |
| Interest |
Nil |
| Royalties |
Nil (5% on film royalties) |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of profits, shipping
profits, dividends and interest exempted from tax as a tax incentive.
Date of entry into force
7 December 1970
ITALY
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts for more than six months.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Paid from Cyprus - Nil
Paid from Italy - 15% |
| Interest |
10% |
| Royalties |
Nil |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of profits, dividends
and interest exempted from tax for a limited period.
Date of entry into force
9 June 1983
KUWAIT
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
10% |
| Interest |
10% (Nil if paid to
the Government) |
| Royalties |
5% (Nil on literary, artistic or scientific work, film
and tv royalties) |
Date of entry into force
25 September 1986
MALTA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts for more than six months.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Paid from Cyprus - 15%
Paid from Italy - Nil |
| Interest |
10% (Nil if paid to
the Government) |
| Royalties |
10% |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of dividends (15%),
interest (10%) and royalties (10%) exempted from tax.
Date of entry into force
11 August 1994
NORWAY
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project does not create a permanent
establishment.
Relief from double taxation
In both countries, relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Paid from Cyprus - Nil
Paid from Norway - 5% (Nil if received by a company controlling 50% or more of the voting
power) |
| Interest |
Paid from Cyprus - 25%
Paid from Norway - Nil |
| Royalties |
Nil |
Date of entry into force
1 January 1955
POLAND
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In Cyprus relief is given in the form of a tax credit.
Poland grants full exemption to income taxed in Cyprus, other than dividends, interest and
royalties. These are taxable in Poland and a tax credit is given for the tax paid in
Cyprus. Exempt income is added to the other income of the taxpayer in Poland in order to arrive at the rate of tax which will be applied on the
income to be taxed in Poland.
Withholding taxes
| Dividends |
10% |
| Interest |
10% (Nil if paid to the Government of the other State) |
| Royalties |
5% |
Date of entry into force
8 November 1992
ROMANIA
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In both countries relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
10% |
| Interest |
10% (Nil if paid to the Government of the other State) |
| Royalties |
5% on patents and
trademarks. No withholding tax on other types of royalties |
| Commissions |
5% |
Tax sparing credits
In Romania, there are tax sparing credit provisions in respect of Cyprus tax which
would have been payable in Cyprus on profits or interest but for tax incentive exemption
or relief in Cyprus, or in respect of Cyprus tax which would have been deductible from any
dividend paid out of profits granted tax incentive exemption or relief in Cyprus but for
such tax incentive exemption or relief.
Date of entry into force
8 November 1982
SWEDEN
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts for more than six months.
Relief from double taxation
In both countries relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
15% (5% if received by a company holding directly at
least 25% of the share capital) |
| Interest |
10% (Nil if paid to the Government of the other State) |
| Royalties |
Nil |
Tax sparing credits
In Sweden, there are tax sparing credit provisions in respect of Cyprus tax which
would have been payable in Cyprus on profits or income (20%) and interest (15%) but for
tax incentive exemption or relief in Cyprus.
Date of entry into force
14 November 1989
SYRIA
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In Cyprus relief is given in the form of a tax credit.
Syria grants full exemption to income taxed in Cyprus, other than dividends, interest and
royalties. These are taxable in Syria and a tax credit is given for the tax paid in
Cyprus. Exempt income is added to the other income of the taxpayer in Syria in order to
arrive at the rate of tax which will be applied on the income to be taxed in Syria.
Withholding taxes
| Dividends |
15% (Nil if received by a company holding directly at
least 25% of the share capital) |
| Interest |
10% (Nil if paid to the Government of the other State) |
| Royalties |
15% (10% on literary, artistic or scientific work, film
and tv royalties) |
Tax sparing credits
In both countries, there are tax sparing provisions in respect of tax on dividends,
interest and royalties reduced or waived as a tax incentive.
Date of entry into force
22 February 1995
UNITED KINGDOM
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts for more than six months.
Relief from double taxation
In both countries relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Paid from Cyprus - Nil
Paid from UK - 15% (if received by a company controlling less than 10% of the voting
power it is entitled to a refund of the Advanced Corporation
Tax) |
| Interest |
10% |
| Royalties |
Nil (5% on film and tv royalties) |
Tax sparing credits
In UK, there are tax sparing provisions in respect of interest exempted from Cyprus
tax for the purpose of promoting development in Cyprus and investment allowances in
respect of certain tourist, industrial, engineering and similar investments.
Special anti-avoidance provisions
Cyprus offshore companies are excluded from obtaining relief under the treaty in
respect of dividends, interest and royalties arising in the UK.
Date of entry into force
18 March 1975
UNITED STATES OF
AMERICA
Permanent establishment
The definition used in the OECD model treaty is generally followed, except that a
construction, installation or assembly project is considered a permanent
establishment if it lasts for more than six months.
Relief from double taxation
In both countries relief is given in the form of a tax credit.
Withholding taxes
| Dividends |
Paid from Cyprus - Nil
Paid from USA - 15% (5% if received by a company controlling 10 or more of the voting
power) |
| Interest |
10% (Nil if paid to the Government, banks or financial
institutions) |
| Royalties |
Nil |
Special anti-avoidance provisions
Cyprus offshore companies are excluded from obtaining relief under the treaty.
Date of entry into force
1 January 1986
USSR
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
The terms of the treaty are such that income is taxed only in one of the contracting
States. Therefore there are no provisions in the treaty for relief.
Withholding taxes
| Dividends |
Nil |
| Interest |
Nil |
| Royalties |
Nil |
Date of entry into force
26 August 1883
YUGOSLAVIA
Permanent establishment
The definition used in the OECD model treaty is generally followed.
Relief from double taxation
In Cyprus, relief is given in the form of a tax credit.
In Yugoslavia, income taxed in Cyprus is exempt from tax,
except for dividends, interest and royalties which are taxable in Yugoslavia and a tax
credit given for the tax paid in Cyprus. Exempt income is added to the other income of the
taxpayer in Yugoslavia in order to arrive at the rate of tax which will be applied on the
income to be taxed in Yugoslavia.
Withholding taxes
| Dividends |
10% |
| Interest |
10% |
| Royalties |
10% |
Date of entry into force
29 June 1986 |
Double
Taxation
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