Cyprus double tax treaty

Cyprus Double Tax Treaty

What is a Double Tax Treaty?

A Double Tax Treaty is an agreement between two or more countries that reduces the amount of tax imposed on a working individual or company. This means that they do not have to pay tax twice on the same income. Under this treaty, tax paid in the country of residence will be exempt in the country in which it arises.

Cyprus is constantly preferred as the most attractive European tax regimes for large businesses or organizations and tax professionals. Cyprus has been recognized for the stability of its tax law. The continuity in interpreting its tax legislation and its considerately low tax and VAT rates.

cyprus double tax treaty
cyprus double tax treaty

Cyprus has a wide network of double tax treaties all over the globe;

The European Union

Cyprus is commonly known as the gateway to the business hub in Europe. Investors in Chine, USA, Canada and Russia choose Cyprus for their structured investment into countries in the EU. Through using the EU Parent-Subsidiary Directive, EU Interest & Royalties Directive, Cyprus Holding & Trading or Finance company; these countries have the most effective path to doing business in the EU.

Eastern Europe

Cyprus has a history of being the primary route of investment in Eastern Europe, especially for countries like Bulgaria, The Czech Republic, Hungary, Poland and Romania.

Russia

Cyprus is the top foreign investor in Russia. The Dividends paid to Cyprus from Russia are only subject to 5% withholding Tax.

*Withholding tax is a set amount of income tax that an employer withholds from an employee’s paycheck and pays directly to the government in the employee’s name.

China

China usually uses Cyprus in International Tax strategies for Globalizing Chinese companies, but also a popular choice for companies looking to expand into China.

cyprus double tax treaty
cyprus double tax treaty

CIS Countries

The USSR/Cyprus Treaty of 29th October 1982 that grants 0% withholding tax on the payment of dividends, interest and royalties is largely applied by CIS Countries.

Other Jurisdictions

Cyprus is a common route for foreign investment into the near and far east, as well as Africa.

cyprus double tax treaty

The following list summarizes the withholding tax rates that may be deducted from income received by a Cyprus tax resident from a resident of a country that has signed a tax treaty with Cyprus:

  • 15% if received by a company controlling less than 25% of the voting power
  • 5% if received by a company controlling more than or equal to 10% of the capital. 15% in all other cases.
  • NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividend. 15% in all other cases.
  • 5% if the amount invested by the beneficial owner is over €200.000 irrespective of the % of voting power acquired. 10% is imposed if received by a holder of at least 25% of the share capital of the paying company. Otherwise the rate is 15%.
  • 5% if received by a company controlling at least 10% of the voting power. 15% in all other cases.
  • 10% if received by company, which has invested less than €100.000.
  • 10% if received by a company controlling more than or equal to 10% of the capital. 15% in all other cases.
  • 0% if  the Government of the other State receives the payment.
  • 0% if paid to the Government of the other State or in connection with 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 is guaranteed from government or other governmental organization.
  • 0% if payment is made to the Government of the other State, to a bank or a financial institution or in respect to debt obligations arising in connection with sale of property or the provision of services.
  • 0% on abstract, sensational, melodic or creative work except for films utilized for TV programs.
  • 5% on film sovereignties (aside from films displayed on TV).
  • 10% on abstract, melodic, imaginative work, movies and TV eminences.
  • NIL on abstract, imaginative or logical work including films.
  • 5% on sovereignty installments in regard of any copyright of logical work any patent, exchange mark, secret equation, interaction or data concerning modern, business or logical experience. 10% in any remaining cases.
  • NIL whenever paid to the Government of the other State, a political region or a nearby power, the National Bank or any establishment the capital of which is completely possessed by the State or a political development or a neighborhood authority or as premium pay from bank stores.
  • 10% on interest got by monetary establishments, on interest paid regarding modern, business, logical hardware or the deal or product between two organizations.
  • 10% on right to utilize modern, business or logical hardware or for data concerning modern, business or logical experience and 15% for licenses, brand names, plans, models, plans, secret equations or cycles.
  • 5% assuming that the profit is gotten by an organization claiming straightforwardly no less than 25% of the capital of the organization paying partitioned. 10% in any remaining cases.
  • This rate doesn’t have any significant bearing, where 25% or a greater amount of the capital of the Cypriot occupant is claimed straightforwardly or by implication by the Bulgarian inhabitant paying the eminences and the Cyprus organization pays not exactly the ordinary pace of expense.
  • 5% is relevant assuming that the profit is gotten by an organization possessing somewhere around 20% of the capital of the profit paying organization or has put resources into the obtaining of offers or different freedoms of the profit paying organization of no less than €100.000. 15% in any remaining cases.
  • The treaty provides that the tax on the gross amount of the dividends shall not exceed that chargeable on the profits out of which the dividends are paid.
  • 7% whenever paid to a bank or comparable monetary organization. NIL whenever paid to the public authority.
  • The settlement accommodates 15% portion charge for profits paid by specific venture vehicles out of pay determined, straightforwardly or in a roundabout way, from charge excluded unfaltering property pay.
  • NIL if paid to or is guaranteed by the Government, statutory body, the Central Bank.
  • 5% on film royalties, including films used for television programs.
  • The treaty between the Republic of Cyprus and the United Soviet Socialist Republic still applies.
  • The arrangement between the Republic of Cyprus the Socialist Federal Republic of Yugoslavia actually applies.
  • The treaty between the Republic of Cyprus and the Czechoslovak Socialist Republic still applies.
  • NIL assuming that the advantageous proprietor is an organization (other than an association) which holds straightforwardly no less than 10% of the capital of the organization delivering the profits where such holding is being had for a continuous time of at the very least one year. 5% in any remaining cases.
  • The treaty is effective from March 1st 2019 and applied on taxes from 1stJanuary 2020 onwards.
  • 5% on the off chance that the advantageous proprietor has put resources into the capital of the organization not exactly what could be compared to €150.000 at the hour of the venture.
  • 0% if paid to the Government or to a local authority, or to the Central Bank.
  • 0% in the event that the useful proprietor is an organization (other than an association) which holds straightforwardly no less than 10% of the capital of the organization delivering the profits, where such holding is being had for a continuous time of something like a year.

0% if the beneficial owner is the other Contracting State or the Central Bank of that other State, or any national agency or any other agency (including a financial institution) owned or controlled by the Government of that other State.

0% if the beneficial owner is a pension fund or other similar institution providing pension schemes in which individuals may participate in order to secure retirement benefits, where such pension fund or other similar institution is established, recognized for tax purposes and controlled in accordance with the laws of that other State. 15% in all other cases.

  • NIL on the off chance that the profit is gotten by an organization (other than an association) holding something like 10% of the capital of the profit paying organization. 5% in any remaining cases.
  • NIL if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends, where such holding is being possessed for an uninterrupted period of no less than 24 months. 5% in all other cases.
  • 5% if the dividend is received by a company (other than a partnership) which controls directly at least 10% of the voting power in the company paying the dividends. 15% in all other cases.
  • NIL if the beneficial owner is:

a.) an organization (other than an association) the capital of which is completely or somewhat separated into offers and which holds straightforwardly something like 10% of the capital of the organization delivering the profit for a continuous time of no less than one year.

b.) a benefits reserve or other comparative establishment perceived as such for charge purposes, or

c.) the Government, a political development, nearby power or national bank of one of the two contracting states. 15% in any remaining cases.

  • 5% if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends. 10% in all other cases.
  • NIL on the off chance that the gainful proprietor is an organization (other than an association) which holds straightforwardly somewhere around 10% on the capital of the organization delivering the profits. 5% in all other cases.
  • 5% assuming that the profit is gotten by an organization which holds somewhere around 10% of the capital of the organization delivering the profit. 10% in all other cases.
  • NIL if the beneficial owner is a company (other than a partnership). 10% in all other cases.
  • NIL assuming the useful proprietor is an organization (other than an association). 5% in any remaining cases.
  • NIL if the beneficial owner is a company which holds directly or indirectly at least 25% of the capital of the company paying the dividends. 5% in all other cases.
  • 5% on royalties for the use of, or the right to use, industrial, commercial or scientific equipment. 8% in all other cases.
  • An exemption from withholding tax on dividends may be available if the conditions for the application of the EU parent-subsidiary directive are satisfied. An exemption from withholding tax on interest may also be available if the conditions for the application of the EU interest and royalties directive are satisfied.

Cyprus Company FAQ

What is the corporation’s tax rate in Cyprus

The corporation tax rate in Cyprus is  12.5% standard Corporate Tax rate.

If the Company is subject to the IP Box the Corporation Tax rate is 2.5%

What is a Cyprus Double Tax Treaty?

A Double Tax Treaty is an agreement between two or more countries that reduces the amount of tax imposed on a working individual or company.

What types of income tax are directly applicable to someone residing in the Republic of Cyprus?

  1. Income tax
  2. Special defense contribution on dividend, interest and income from rentals.
  3. Capital gains from the selling real estate in the Republic.

What range of Double Tax Treaties does Cyprus have all over the globe?

Cyprus has Double Tax Treaties with;

  1. The European Union.
  2. Eastern Europe.
  3. China.
  4. CIS Countries.
  5. Russia.
  6. And other jurisdictions.

What does zero income tax mean?

Zero income tax means that less money is coming out of your paycheck each month, and when tax season c0mes around, you only have to submit a federal return.

Contact us

Where to find us:

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P.O. BOx  42656, P.C. 6501, 6043

Larnaca – Cyprus

Tel: +357 24663402 , Fax: +357 24663409

E-mail: admin@cyprusconsultancy.com


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