Double Tax Treaties (“DTTs”) aim to promote and enhance the commercial and economic interaction between States by clearly defining where tax shall arise and by allocating the taxing rights between the Contracting States. Cyprus continues to expand its Double Tax Treaty network as a means to attract further investment and become a more accessible and transparent jurisdiction.
On this note, a new treaty between Cyprus and Iceland was signed on 13 November 2014 at the Embassy of Cyprus in Stockholm. The DTT follows the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital.
According to the DTT a 5% withholding tax shall apply on dividend payments if the receiving company being the beneficial owner of said income, owns at least 10% of the capital in the dividend paying company. A 10% withholding tax shall apply in a different case. Further, no withholding tax shall be suffered on interest payments and a 5% withholding tax on royalty payments on the basis that the receiving company is the beneficial owner of the income.
Katerina A. Charalambous
+357 22 699 222