Cyprus Double Tax Treaties (DTT) and Conversions

1. One of the main reasons why Cyprus has become a very popular jurisdiction for establishing a base for international business is the availability of a large number of double tax treaties, which number today, 45 in total.
2. Many of the well-known offshore tax jurisdictions impose a low or nil income tax on the company profits. However the problem with those jurisdictions is that they do not have double tax treaties. Cyprus offers a full basket of incentives including the low tax on the net profits and the double tax treaties.
3. Other than the Double Tax Treaties which are presently in force, the conclusion of various other Treaties is pending. These Treaties are currently under negotiation. Moreover, certain Treaties have already been concluded, however they are pending enforcement.
4. All Cyprus’ double tax treaties have been drafted so as to accord very closely to the Organization in Economic Cooperation and Development (OECD) model Tax treaty. The treaties aim to avoid double taxation of income earned in these countries. This is achieved usually by either exempting the income from tax, by providing a tax credit for the amount of tax paid in other contracting country or by a reduced withholding tax.

Explanatory Notes:

1. Under Cyprus legislation there is no withholding tax on dividends, interests and royalties paid to non-residents of Cyprus.
2. In case where royalties are earned on rights used within Cyprus there is withholding tax of 10%.
   
3. 5% on film and TV royalties.
4. Nil if paid to a Government or for export guarantee.
5. Nil on literary, dramatic, musical or artistic work.
6. Nil if paid to the Government of the other state.
7. This rate applies for patents, trademarks, designs or models, plans, secret formulas or processes, or any industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
8. 15% if received by a company controlling less than 25% of the voting power or by an individual.
9. 15% if received by a person controlling less than 10% of the voting power.
10. Nil if paid to a Government bank or financial institution.
11. The treaty provided for withholding taxes on dividends but Greece does not impose any withholding tax in accordance with its own legislation.
12. 5% on film royalties (apart from films broadcasted on television).
13. 5% if received by a person controlling less than 50% of the voting power.
14. This rate applies to individual shareholders regardless of their percentage of shareholding. Companies controlling less than 10% of the voting shares are also entitled to this rate.
15. 10% for payments of a technical, managerial or consulting nature.
16. Treaty rate 15%, therefore restricted to Cyprus legislation rate.
17. 10% if dividend paid by a company in which the beneficial owner has invested less than €100,000.
18. If investment is less than €200,000, dividends are subject to 15% withholding tax which is reduced to 10% if the recipient company controls 25% or more of the paying company.
19. No withholding tax for interest on deposits with banking institutions.
20. Armenia, Kyrgyzstan, Tadzhikistan and Ukraine apply USSR/Cyprus treaty.
21. 10% on interest received by a financial institution or when it relates to sale on credit of any industrial, commercial or scientific equipment or of merchandise.
22. This rate applies for any copyright of litenary, dramatic, musical, artistic or scientific work. 10% rate applies for industrial, commercial or scientific equipment. 15% rate applies for patents, trademarks, designs or models, plans, secret formulae or processes.
23. This rate applies to companies holding directly at least 25% of the share capital of the company paying the dividend. In all other cases the withholding tax is 10%.
24. This rate does not apply if the payment is made to a Cyprus international business entity by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity.
25. 7% if paid to bank or financial institution.
26. Montenegro, Serbia and Slovenia apply the Yugoslavia/Cyprus treaty.
27. The treaty is effective from 1 January 2009.
28. This rate applies if received by a company (excluding partnership) which holds directly 25% of the shares. 10% rate applies in all other cases.
29. A treaty with Qatar has been signed but has not been ratified yet.
30. This rate applies if received by a company (excluding partnership) which holds directly at least 10% of the shares for an uninterrupted period of no less than one year. 5% applies in all other cases.
31. 10% for patent, trade mark, design or model, plan, secret formula or process, computer software or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.
    

• +  The Treaty with Moldavia was signed on the 28th January 2008 and the date of entry into force was on the 03rd September 2008.
• ++The Treaty with Qatar has been signed on 11 November 2008 and the date of entry into force was on the 20th March 2009.
• +++ The Treaty with Chech Republic still into force. The Treaty signed on 15th of April 1980 and enforced on the 30th December 1980 ceased to apply as from 01 January 2010, date of application of the provision of the new Treaty that was has been signed on 28th April 2009 and the date of entry into force was on the 26th November 2009.