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Cyprus/June 2014 The bilateral agreement on Income and Capital signed between the Republic of Cyprus and Spain on the 14th of February 2013 has entered into force as of 28 May 2014, upon its ratification by both Contracting States. The provisions of the treaty regarding taxes on income and capital shall have effect as of 1st January 2015 and in all other cases the effective day will be the day that the Convention has entered into force (i.e. 28 May 2014). Cyprus is thus effectively removed from the Spanish “blacklist”. According to the provisions of the double tax treaty there shall be no withholding tax on interest income (Article 11) and royalty income (Article 12) paid by a resident of one Contracting State to a resident of the other Contracting State (provided that the latter is the beneficial owner of the said income). With regards to dividend payments (Article 10), a 0% withholding tax will be suffered at the source State provided that the beneficial owner of the dividend income is a company the capital of which is wholly or partly divided into shares and holds at least 10% of the capital of the company paying the dividend. In a different case a 5% will be suffered. Nonetheless, it is important to note that according to the Cyprus domestic tax legislation no withholding tax is imposed on dividend, interest or royalty payments abroad. In addition, as per Article 13 of the double tax treaty, any capital gains arising from the disposal of immovable property will be taxed in the State where the property is situated. The Article further adds that gains arising from the disposal of shares, or comparable interests not listed on the Stock Exchange of either Contracting State, and derive more than 50% of their value from immovable property situated in the other Contracting State may be taxed in that other State. The agreement expands Cyprus’s already extensive network of double tax treaties and provides beneficial provisions and additional incentives to MNEs investing or wishing to invest in the two Contracting States. Taxand: DTT between Cyprus & Spain enters into force Katerina Charalambous Michalis Zambartas