Cyprus – Iran Double Tax Treaty also entered into force on 5 March 2017

As of 1 January 2017, Cyprus’ Double Tax Treaty network has grown to include four new treaties with India, Latvia, Bahrain and Georgia.

Cyprus has also signed treaties with Ethiopia, Iran and Jersey but this are yet to be ratified.

A protocol with Ukraine updating the existing Double Tax Treaty has also been signed but not yet been ratified.

Double Tax Treaties are fundamental in allowing for the efficient investment in either country. In essence, a Double Tax Treaty will ensure that an investor will not have to pay taxes on income in both countries (i.e. country of residence and source of business activity / income) at once.

All new treaties are based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention framework with certain modifications in each case.

Cyprus – India Double Tax Treaty

Although a Treaty between Cyprus and India was previously signed in 1994, this was updated to reflect global taxation, political and economic changes. The new Treaty is effective as of 1 January 2017 in Cyprus and 1 April 2017 in India.

The main provisions of the Treaty are as follow:

Withholding Tax: 10% withholding tax on dividends, interest (exemption for interest arising from the Government of a state, political sub-division or local authority) and on royalties and fees for technical services.

Capital Gains: any resulting Capital Gains by a resident of Cyprus or India will be taxable in the country of investment.

Gain from the disposal of shares that have been purchased before 1 April 2017 shall be taxable only in the country in which the individual is resident.

The Treaty includes an article on assistance in the collection of taxes.

Cyprus – Latvia Double Tax Treaty

The main provisions of the Treaty are as follow:

Withholding Tax: if the recipient is a company and the beneficial owner of the income, zero withholding tax on dividends; 10% withholding tax in all other cases. This is subject to an exemption for interest arising and beneficially owned by the government of a country, including political sub divisions and local authorities, as well as for interest paid in respect of a loan guaranteed by a government, subdivision or authority.

Capital Gains: any resulting Capital Gains by a resident of Cyprus or Latvia will not be taxable in the country of investment (apart from gains from immovable property, gains from movable property of a property establishment, gains from the sale of shares/comparable interests deriving from than 50% of their value directly from immovable property situated in the country of investment).

The Treaty includes an article on offshore activities.

Cyprus – Bahrain Double Tax Treaty

The main provisions of the Treaty are as follow:

Withholding Tax: zero withholding tax imposed on dividends, interest and royalty payments.

Capital Gains: any resulting Capital Gains by a resident of Cyprus or Bahrain will not be taxed in the country of investment except for gains from immovable property and gains from the alienation of movable property of a permanent establishment.

Gains from the sale of shares will only be taxed in the country of residence of the seller of the shares.

Cyprus – Iran Double Tax Treaty

Significantly, the DTT signed between Cyprus and Iran on 4 August 2015 entered into force on 5 March 2017 and will come into effect as of 1 January 2018.

The Treaty is expected to pave the way for new investment possibilities between Cyprus and Iran.

Dividends:

  • Not greater than 5% (at source) of the gross amount if the beneficial owner is a company which holds directly at least 25% of the capital of the company which pays the dividends and the recipient is the beneficial owner of the dividends;
  • 10% of the gross dividend amount in all other cases (if the recipient of the dividends is the beneficial owner).

Interest: not greater than 5% (at source) of the gross interest amount if the recipient is the beneficial owner.

Royalties: not greater than 6% (at source) of the gross royalty amount if the recipient is the beneficial owner.

Capital Gains: Capital Gains resulting from the disposal of immovable property will be taxed in the country in which the immovable property is located. Capital gains arising from the disposal of shares in a company deriving more than 50% of the value directly from immovable property shall be taxed in the country in which the property is situated.