Cyprus – Double Tax Treaties

cyprus

 

DOUBLE TAX TREATIES
Cyprus is considered to be a country holding a quite significant position in international tax planning as a number of fiscal benefits can be accumulated to foreign entities by using the advantages offered from the use of a Cyprus off-shore company for a successful application of the theory of International Tax Planning. The actual theory of International Tax Planning refers to the arrangement of financial and business affairs in a way so as to be able to magnetize the minimum tax either locally or internationally, without being in any event in conflict with any tax laws or without deceiving the inland revenue authorities by not declaring profits or by other ways of fraudulent actions. The position held by Cyprus in the field of International Tax Planning derives both from the favorable tax regime established as well as for the wide network of double tax treaties. Other jurisdictions in various parts of the world offer similar or sometimes more advantageous taxation benefits, however what makes Cyprus more attractive and advantageous in comparison to other jurisdictions is the extensive network of Double Tax Treaties that Cyprus has concluded with a number of countries. The central purpose for the conclusion of these treaties is the avoidance of double taxation of income earned in both in any of the two contracting states. According to these agreements:

i) either a credit is allowed on any tax paid in another country against the Cyprus tax

ii) or the income is totally exempted from tax.

As a result of the application of the treaty the taxpayer does not pay more than the higher of the two rates or he is not taxed twice on the same income. The existence of the treaties in conjunction with the low taxation regime applicable for offshore companies both for the beneficial owners and expatriate personnel put Cyprus in one of the most advantageous positions in the world for International Tax Planning.
TREATIES FOR THE AVOIDANCE OF DOUBLE TAXATION
TAX TREATMENT OF DIVIDENDS, INTERESTS AND ROYALTIES
Paid from countries shown below
to residents of Cyprus		 Paid from Cyprus to residents of the countries shown below
Country Dividends Interests Royalties Dividends Interests Royalties
1  Ausria  10%  nil    nil  10%  nil    nil 
2  Belarus  5%(i)  5%    5%  5%(i)  5%    5% 
3  Belgium  10%(2)  10%  m  nil  10%(2)  10%  (3)  nil 
4  Bulgaria  5%w  7%(5)(6)    10%(6)  5%(4)  7%(5)    10% 
5  Canada  15%  15%  (3)  10%(7)  nil  15%  (3)  10%(7) 
6  China  10%  10%    10%  10%  10%    10% 
7  CIS***  nil  nil    nil  nil  nil    nil 
8  Czech Republic  10%  10%  (3)  5%(8)  nil  10%  (3)  5%(s) 
9  Denmark  10%(2)  10%  w  nil  10%(2)  10%  (3)  nil 
10  Egypt  15%  15%    10%  15%  15%    10% 
11  France  10%(9)  10%  w  nil(io)  nil  10%  W  nil(io) 
12  Germany  15%(ii)  10%  w  nil(io)  nil  10%  (3)  nil(io) 
13  Greece  25%  10%    nil(12)  25%  10%    nil(12) 
14  Hungary  5%(13)  10%  w  nil  nil  10%  (3)  nil 
15  India  10%(9)  10%  (3)  15%  10%(9)  10%  (3)  15% 
16  Ireland  nil  nil    nil(12)  nil  nil    nil(12) 
17  Italy  15%  10%    nil  nil  10%    nil 
18  Kuwait  10%  10%  w  5%(8)  nil  10%  (3)  5%(8) 
19  Malta  nil  10%  (3)  10%  15%  10%  (3)  10% 
20  Mauritius  nil  nil    nil  nil  nil    nil 
21  Norway  5%(14)  nil(is)    nil  nil  25%  (16)  nil 
22  Poland  10%  10%  (3)  5%  10%  10%  W  5% 
23  Romania  10%  10%  (3)  5%(s)  10%  10%  (3)  5%(8) 
24  Russia  5%(17)  nil    nil  5%(17)  nil    nil 
25  Singapore  nil  7%(is)    10%  nil  7%(is)    10% 
26  Slovakia  10%  10%  (3)  5%m  nil  10%  (3)  5%(8) 
27  Slovenia  10%  10%    10%  nil  10%    10% 
28  South Africa  nil  nil    nil  nil  nil    nil 
29  Sweden  5%(13)  10%  (3)  nil  5%(13)  10%  W  nil 
30  Syria  15%(19)  10%  (3)   10%(20)  15%(19)  10%  W  10%(20) 
31  Thailand  10%  10%  (21)   5%(22)  10%  10%  (21)  5%(22) 
32  UK  15%(23)  10%    nil(10)  nil  10%  nil(io)   
33  USA  5%(24)  10%  (3)  nil  nil  10%  (3)  nil 
34  Yugoslavia  10%  10%    10%  nil  10%    10% 
35  All other countries (12)  (12)    (12)  0-40% (i6)  0-40% (16)    10% (25) 

All the treaties refer to those which have been ratified. There are 32 treaties covering 40 countries. The numbers In the brackets refer to the explanatory notes here below. ** Under Cyprus tax law, dividends paid to non-resident companies are not subject to witholding tax.***Includes Armenia, Azerbaijan, Kyrgyzstan, Moldova, Tajikistan, Ukraine, Uzbekistan but excludes Belarus, Kazakhstan, Russia and Turkmenistan.

Explanatory Notes
(1) 5% of the gross amount if the beneficial owner has a holding in the share capital of the paying company of at least ECU200.000; 10% if the beneficial owner holds directly at least 25% of the share capital of the paying company;15% in all other cases.

(2) 10% of the gross amount if recipient is a company with at least 25% direct (also indirect in the case of Belgium) share interest; 15% in all other cases.

(3) Subject to certain exemptions.

(4) 5% if beneficial owner is a company which holds directly at least 25% of the capital of the company paying the dividends; 10% in all other cases.

(5) Nil if interest is paid or guaranteed by the government of the other state or a statutory body thereof or to the central bank of the other state.

(6) These rates shall not apply if at least 25% of the capital of the Cypriot resident is owned directly or indirectly by the Bulgarian resident (either alone or with other related persons) that is pay ing the interest or royalties, except when the resident of Cyprus is not liable to tax which is lower than the usual tax rate.

(7) Nil if royalties are copyright and other literary,