Cyprus Double Tax Treaty

Cyprus Double Tax Treaty Strategy: Received in & Payed From Cyprus

Introduction:

 "In view of the fact that Cyprus has a large number of double tax treaties, incoming dividends received by a Cypriot Private Company (structured for holding or trading) from its foreign subsidiary are either exempt from or subject to low withholding taxes, in the subsidiary's jurisdiction..

Through the avoidance of double taxation of income earned in any of the treaty countries, a constructive use of the Cyprus treaty network can offer considerable advantages to both individuals or businesses who chose to establish a company in Cyprus"

Note: Tax treaties legally supersede local tax legislation in most countries. For this reason treaties are a useful tools to protect businesses and individuals against double taxation of income earned in other countries in order to apply for favorable tax rates or tax exemption in Cyprus.

Cyprus Tax Treaties Overview:

Cyprus entered into more than 40 double-tax treaties which is quite unusual considering its fame as a low-tax jurisdiction.

The general effect of these treaties is: „offshore entities registered in Cyprus, having tax exemptions in Cyprus will have the same exemptions in the treaty countries.”

Most of the Cyprus tax treaty contracts follow the OECD Model Convention. The US Treaty however follows the most recent model of United States Agreements. This means that the country of residence will give a credit for taxes paid in the other treaty country. The Cyprus offshore entity qualifies for treaty protection under all the extent treaties, except those with Canada, France, the UK and the USA. However also in these cases, the limitations apply only to income flowing to Cyprus and not to income flowing from Cyprus to the countries concerned.

Revisions to Cyprus's corporate tax regime consequent to its accession to the EU, and the abolition of the 'offshore' sector as such, have made Cyprus more, rather than less attractive as a tax treaty partner. The island has found itself needing to revise many of its treaties as a result, as well as entering new treaties with additional countries.

Treaties will be used where EU directives are not applicable.

The Cyprus Double Tax Treaties in Detail: Payments & Receiving of Dividends

Cyprus Double Tax Treaty Table 
Received in Cyprus

Received in Cyprus* Country Dividends (%) Interest (%) Royalties (%) Austria 10 0 0 Belarus 2005.10.15 5 5 (5 if amount invested > 200.000 EURO irrespective of % of votes / 10 if at least 25% of share cap. / otherwise 15) Belgium 10/15 if <25% of votes 10 / 0 if paid to public body 0 Bulgaria 5 / 10 if received by a company owning < 25% of share cap. 7 / 0 if paid to or guaranteed by a public body 10 / does not apply if > 25% of cap. of Cypriot resident owned directly or indirectly by Bulgarian resident paying the royalties and the Cyprus company is subject to a preferential tax rate Canada 15 15 / 0 if paid to the Government or for export guarantee 10 / 0 on literary, dramatic musical or artistic work with the exception of films used for television programs China 10 10 10 CIS (Armenia, Kyrgyzstan, Moldova, Tajikistan, Uzbekistan, and Ukraine consider themselves bound by the treaty signed with the former USSR. The rates shown are those of the treaty Cyprus / USSR) 0 0 0 Czech Republic 10 10 / 0 if paid to public body or financial institution 5 / 0 on literary, artistic or scientific work including films Denmark 10/15 if < 25% of votes 10 / 0 if paid to Government or in connection to the sale on credit of any industrial, commercial or scientific equipment or any merchandise by one enterprise to another or in relation to any form of loan granted by a bank or guaranteed from Government or other State body 0 Egypt 15 15 10 France 10/15 if < 10% of votes 10 / 0 if paid to Government or in connection to the sale on credit of any industrial, commercial or scientific equipment or any merchandise by one enterprise to another or in relation to any form of loan granted by a bank or guaranteed from Government or other State body 0/5 on films including films used for television programs Germany 10/15 if <25% of votes 10/ 0 if paid to public body or financial institution 0 / 5 on films including films used for television programs Greece 25 but local rate is NIL so 0% 10 0 / 5 on film royalties (except films shown on TV) Hungary 5/15 if <25% of votes 10/ 0 if paid to public body or financial institution 0 India 10/15 if <10% of votes 10/ 0 if paid to public body or financial institution 15 / 10 on payment of technical fees, management fees and consultancy fees Ireland 0 0 0 / 5 on film royalties (except films shown on TV) Italy 15 10 0 Kuwait 10 10/ 0 if paid to public body or financial institution 5 / 0 on literary, artistic or scientific work including films Lebanon 5 5 / 0 if paid to public body 0 Malta 0 The treaty provides that the tax on gross dividends shall not exceed that chargeable on the profits out of which the dividend is paid 10/ 0 if paid to public body or financial institution 10 Mauritius 0 0 0 Norway 5 / 0 if >50% of votes 0 0 Poland 10 10/ 0 if paid to public body or financial institution 5 Romania 10 10/ 0 if paid to public body or financial institution 5 / 0 on literary, artistic or scientific work including films Russia 5 / 10 if received by a company which has invested < $100.000 0 0 Singapore 0 10 / 7 if paid to a Bank or similar financial institution / 0 if to the Government 10 Slovakia 10 10/ 0 if paid to public body or financial institution 5 / 0 on literary, artistic or scientific work including films South Africa 0 0 0 Sweden 5/15 if <25% of votes 10/ 0 if paid to public body or financial institution 0 Syria 0/15 if <25% of votes 10/ 0 if paid to public body or financial institution 15 / 10 on literary, dramatic, musical, artistic work, films and TV Thailand 10 15 / 10 on interest received from financial institutions, on interest paid in connection with industrial, commercial, scientific equipment or the sale or merchandise between two companies 5 / 10 on right to use industrial, commercial or scientific experience / 15 on patents, trademarks, designs, models, plans, secret formulas or processes United kingdom 15 but local UK tax provides for 0 - so 0% 10 0/5 on films including films used for television programs United States of America 15 / 5 if more than 10% of votes 10 / 0 if paid to the Government or a bank or a fin. Inst. Or in respect to debt obligations arising in connection with sale of property or the provision of services 0 Yugoslavia 10 10 10 Cyprus Double Tax Treaty Table  Payed from Cyprus Paid from Cyprus Country Royalties*(%) Austria 0 Belarus 5 Belgium 0 Bulgaria 10 Canada 10 / 0 on literary, dramatic musical or artistic work with the exception of films used for television programs China 10 CIS (Armenia, Kyrgyzstan, Moldova, Tajikistan, Uzbekistan, and Ukraine consider themselves bound by the treaty signed with the former USSR. The rates shown are those of the treaty Cyprus / USSR) 0 Czech Republic 5 / 0 on literary, artistic or scientific work including films Denmark 0 Egypt 10 France 0 /5 on films including films used for television programs Germany 0 /5 on films including films used for television programs Greece 0 /5 on film royalties (except films shown on TV) India 15 / 10 on payment of technical fees, management fees and consultancy fees Ireland 0 /5 on film royalties (except films shown on TV) Italy 0 Hungary 0 Kuwait 5 / 0 on literary, artistic or scientific work including films Lebanon 0 Malta 10 Mauritius 0 Norway 0 Poland 5 Romania 5 / 0 on literary, artistic or scientific work including films Russia 0 Singapore 10 Slovakia 5 / 0 on literary, artistic or scientific work including films South Africa 0 Sweden 0 Syria 15 / 10 on literary, dramatic, musical, artistic work, films and TV Thailand 5 / 10 on right to use industrial, commercial or scientific experience / 15 on patents, trademarks, designs, models, plans, secret formulas or processes United Kingdom 0/5 on films including films used for television programs United Sates of America 0 Yugoslavia 10 *Low or no withholding taxes on outgoing dividends, interest and royalties (no withholding tax on dividends and interest – therefore there is no columns included above - no withholding tax on royalty payments for use of the rights outside Cyprus, 10% if the rights will be used in Cyprus (subject to DTT & EU Directives) and 5% on films (subject to DTT & EU Directives). * If the rates of Cyprus tax are lower than those provided by the relevant treaty, then the lower rates are applicable in favor of the taxpayer. In Conclusion: Considering that Cyprus is part of the EU, its no longer offshore status can be considered especially appealing as the country is no longer target of suspicion. According to newly formed agreements stipulated upon its accession to the EU Cyprus has adopted a policy of clear communication and information sharing (as regards company accounts) between the member states. Despite this Cyprus has continued to adopt a fierce tax savings policy by aiming at creating and bargaining the most favorable treaty agreements with its EU members. A smart combination of the above makes the Republic possibly one, if not the most interesting onshore tax savings destination today.

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Web Content Sources: FBSCyprus.com website & Low-Tax.net website.