The double taxation agreement between Cyprus and Portugal, which
was signed on 19 November 2012, entered into force on 16 August
2013 following the completion of ratification procedures by the two
countries and the exchange of notifications of ratification.
The new agreement applies to the 2014 and subsequent tax years. It
mirrors the latest OECD Model agreement and provides for a maximum
withholding tax rate of ten per cent on dividends, interest and
royalties. It should be noted that Cyprus does not impose
withholding taxes except on royalties arising from use of an
intellectual property asset within Cyprus, and that withholding
taxes may also be eliminated under EU directives.
The Protocol to the agreement provides safeguards against abuse of
the exchange of information provisions. Requests for information
from the tax authorities of one country to the other must be
accompanied by:
-
information demonstrating the foreseeable relevance of the information to the request;
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a statement that the request is in conformity with the law and administrative practices of the contracting state requesting it;
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confirmation that if the requested information was within the jurisdiction of that contracting state then the competent authority would be able to obtain the information under the laws of the requesting contracting state or in the normal course of administrative practice; and
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a statement that the contracting state making the request has exhausted all reasonable means available in its own territory to obtain the information.
Information will be provided only if the contracting state
making the request has reciprocal provisions or applies appropriate
administrative practices for the provision of the information
requested.
The entry into force of the double tax agreement fully normalises
tax relations between Cyprus and Portugal, which still retains a
"blacklist" of more than 80 countries or territories,
including the Channel Islands, Gibraltar, Hong Kong, the Isle of
Man, Qatar, Seychelles and the British and US Virgin Islands, whose
residents are denied certain benefits of the Portuguese tax system
and are subject to the Portuguese CFC rules and to higher rates of
certain taxes. Cyprus was removed from the list in 2011.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
