On 8 December 2024, the Republic of Cyprus and the Government of the Sultanate of Oman signed a new Double Taxation Agreement (DTA) aimed at preventing double taxation, curbing tax evasion, and encouraging bilateral economic collaboration. This agreement signals both nations’ commitment to strengthening international tax cooperation and promoting a more transparent and investment-friendly environment.
The agreement was previously approved by Cyprus’s Council of Ministers on 19 July 2023 and was formally published in the Official Gazette of the Republic of Cyprus on 13 December 2024 (No. 4291, Supplement VII, pages 519–545, English version).
Objectives of the DTA
The key goal of the agreement is to avoid the double taxation of income earned between the two countries and establish a solid legal framework for information exchange and tax transparency. By eliminating tax-related barriers, the DTA facilitates smoother operations for businesses and individuals engaging in cross-border activities, offering greater financial predictability and compliance ease.
Notable Provisions
The Cyprus–Oman DTA is based on principles from the OECD Model Tax Convention and includes several essential provisions:
1. Withholding Taxes
- Dividends: A reduced 5% rate applies where the recipient holds at least 10% of the company’s capital; a 10% rate applies in other cases.
- Interest: Interest payments to a resident of the other state are taxed at a maximum of 5%, assuming beneficial ownership.
- Royalties: Payments for royalties are subject to an 8% withholding tax, provided the recipient is the beneficial owner.
2. Capital Gains
- Gains from the sale of immovable property or shares in property-rich companies may be taxed in the country where the property is located.
- All other capital gains from the sale of shares or securities are generally taxable only in the country of residence of the seller.
3. Permanent Establishment (PE)
A PE is defined as a fixed place of business through which a company’s activities are wholly or partly conducted. Specific clauses address construction projects, service delivery, and agency relationships.
4. Relief from Double Taxation
Both Cyprus and Oman apply the credit method to prevent double taxation. This means taxes paid in one jurisdiction can be credited against tax liabilities in the taxpayer’s country of residence.
5. Exchange of Information
In line with OECD standards, the treaty allows for the exchange of tax-related information to enhance compliance and combat tax evasion.
6. Non-Discrimination
The treaty ensures that individuals and companies from one contracting state will not face more onerous taxation in the other state than local residents under similar circumstances.
7. Mutual Agreement Procedure (MAP)
A formal MAP mechanism is in place for resolving tax disputes arising from the interpretation or application of the treaty.
Strategic Relevance
This agreement enhances Cyprus’s already strong treaty network in the Gulf and supports Oman’s Vision 2040, which prioritizes foreign investment and economic diversification. The DTA helps create a more stable and predictable tax environment for investors from both nations.
Eurofast’s Perspective
The Cyprus–Oman DTA marks a significant development for businesses operating in or entering these markets. At Eurofast, we assist clients in leveraging treaty benefits and optimizing cross-border tax structures. Whether you’re expanding into Oman or managing income flows across jurisdictions, our team can guide you through the practical application of this agreement.