Cyprus Double Tax Treaties

Cyprus is a signatory to a treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of two countries against the tax payable in the other, in this way preventing double taxation.

The following tables summarises the withholding tax rates applicable:

1) Received in Cyprus*

Important Notes:
*Possible use can be made of EU Directives to eliminate or reduce these rates - so rendering the treaty benefits is redundant. Treaties will be used where EU Directives are not applicable.

Spain and Cyprus signed a tax treaty on 14 February 2013, but the treaty is effective from 1st January 2015. The treaty provides that a 0% withholding tax will apply to dividends paid to a company whose capital is wholly or partly divided into shares that holds directly at least 10% of the capital of the payer company; otherwise, the rate will be 5%. Interest and royalties will be taxable only in the state of residence. If the conditions for application of the EU parent-subsidiary directive apply, no tax will be withheld on dividends.

On 24 February 2014, a new agreement has been signed with Norway. The treaty is effective from 1st January 2015.

Cyprus and Lithuania signed a tax treaty on 21 June 2013, but the treaty is effective from 1st January 2015. The treaty provides for a 0% withholding tax on dividends where the beneficial owner is a company (other than a partnership) that holds directly at least 10% of the capital of the payer company; otherwise, the rate will be 5%. Cyprus, however, does not levy withholding tax on dividends. Interest will be taxable only in the state of residence of the recipient. The rate on royalties will be 5%.

2) Paid from Cyprus

Important Notes:

*Low or no withholding taxes on outgoing dividends, interest and royalties (no withholding tax on dividends and interest – therefore there is no columns included below - 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.

*Possible use can be made of EU Directives to eliminate or reduce these rates - so rendering the treaty benefits is redundant. Treaties will be used where EU Directives are not applicable. No tax is withheld when the royalty is paid for use outside Cyprus.

* No tax is withheld when the royalty is paid for use outside Cyprus