In the months since the new year, Cyprus has expanded and improved its network of Double Tax Treaties (DTT) with various new Treaties coming into effect as of 1 January 2018.

Cyprus – Jersey

The Cyprus – Jersey double tax treaty signed on 11 July 2016 came into force as of 1 January 2018.

One of the most important features of the treaty is that no withholding tax is imposed on the payment of dividends, interest and royalties.

Further, any gains from the disposal of immovable property will be taxed in the country where the asset is located. Gains from the disposal of shares will be taxed in the country where the seller is located.

Cyprus – United Kingdom

On 22 March 2018, Cyprus signed a new tax treaty with the United Kingdom which will replace the current DTT signed in 1974, as amended by the 1980 Protocol.

The treaty will enter into force once both countries complete their formal legal procedures and will subsequently come into effect as of 1 January of the next calendar year in the case of Cyprus.

Some of the key features of the treaty include the following:

Dividends, Interest and Royalties: No withholding tax imposed on dividends, interest and royalties, except on certain dividends paid out of income derived from immovable property by certain investment vehicles. In this case, a maximum of 15% withholding tax may apply.

Capital Gains: capital gains arising from the alienation of shares will be taxed in the country of residency of the alienators, unless more than 50% of the value of the shares is directly or indirectly derived from immovable property situated in the other country. In this case, the source country will have the right to tax.

Cyprus will also retain the exclusive taxing rights on pension income of Cyprus tax residents, except in cases of UK Government service pensions.

Cyprus – Saudi Arabia

On 5 March 2018, the first double tax treaty between Cyprus and Saudi Arabia, signed on 3 January 2018, has been ratified.

Some of the key features of the treaty include the following:

Dividends: No withholding tax imposed on dividends if the beneficial owner is a company which directly or indirectly holds a minimum of 25% of the capital of the company paying the dividends. In all other cases, withholding tax shall not exceed 5%.

Irrespectively, Cyprus does not impose withholding tax on payments of dividends to non-Cyprus tax residents.

Interest: No withholding tax is imposed if the recipient of the interest is the beneficial owner of the income.

Royalties: If the recipient of the royalties is the beneficial owner, then withholding tax shall not be greater than 5% of the gross amount of royalties in certain cases and in any case, shall not exceed 8%.

Capital Gains: Cyprus retains the exclusive taxing rights on disposals of shares made by Cyprus tax residents, with certain exceptions.

This treaty is expected to further strengthen the cooperation between Cyprus and Saudi-Arabia.

Cyprus – Barbados

One such treaty is the Cyprus – Barbados DTT which was signed on 1 May 2017 and came into effect as of 1 January 2018 paving the way for new investment opportunities between the two countries.

One of the most important features of this DTT is that it provides for 0% withholding tax on payments of dividends, interest and royalties.

Cyprus – Ethiopia

The first double tax treaty between Cyprus and Ethiopia which was signed in December 2015, came into effect as of 1 January 2018.

The treaty provides for only 5% withholding tax on payments of dividends, interest and royalties. An exemption from this withholding tax is made in cases where interest is beneficially owned by the Government, a political subdivision, local authority or the National Bank of the recipient State. In any case, Cyprus does not impose withholding tax on payments of dividends and interest to non-Cyprus residents (and under conditions, on payments of royalties to non-Cyprus residents).