Double Tax Avoidance Agreement (DTAA) was signed between Cyprus and Saudi Arabia on 03 January 2018, in Riyadh for the avoidance of double taxation between two countries and the prevention of tax evasion.
Ioannis Kasoulides, Minister of Foreign Affairs of Cyprus and Mohammad Abdullah Al-Jadaan, Minister of Finance of Saudi Arabia, signed an agreement for Double Taxation Avoidance (DTAA).
During the historic visit of president Nicos Anastasiades to Saudi Arabia, in order to improve Cyprus relations with the Gulf countries, a number of bilateral agreements have signed between the two countries.
One of the agreements which was inked on Wednesday, 03 January 2018, in Riyadh is the agreement for the avoidance of double taxation between two countries and the prevention of tax evasion.
The Double Tax Treaty applies to income taxes as well as on income from alienation of property based on the OECD Model tax convention.
According to the Ministry of Finance, the convention will contribute to developing economic relations between Cyprus and Saudi Arabia and increase co-operation in tax related matters.
One of the main objectives of Cyprus is to improve ties with other countries and expand its double taxation agreements in order to strengthen the Island as a global business centre.
The Tax Treaty covers different areas in each of the two countries. In the case of Cyprus, it applies to corporate and personal income tax, defence tax and capital gains tax. In the case of Saudi Arabia, it covers the Zakat and the income tax (including the natural gas investment tax).
According to the Baker Tilly, other areas of coverage of the Tax Convention are as follows:
The withholding tax on dividends is 5%. In cases where there is at least 25% participation by a company that is tax resident in the receiving jurisdiction, there is no withholding tax.
As long as the recipient of the interest is the beneficial owner of the income, there is no withholding tax on interest.
As long as the recipient of the royalties is the beneficial owner of the income, the withholding tax is 8%. In cases where the royalties are paid for the use of, or the right to use, industrial, commercial or scientific equipment, the withholding tax is 5%.
Gains arising from the disposal of shares of a substantial participation in the capital of a company which is resident of a Contracting State may be taxed in that Contracting State.
A person is considered to have a substantial participation when this participation is at least 25% of the capital of that company, at any time within twelve months prior to the disposal of the shares.
Another two important agreements which were signed on the same day between Cyprus and Saudi Arabia, are a civil aviation executive programme signed between Transport Ministers of the two countries and a MoU which was signed on political consultations between foreign ministries of Cyprus and Saudi Arabia to discuss common interest issues and provide consultations, twice a year.
Energy issues, security and the fight against terrorism, regional relations, and the need to strengthen the EU's relations with Gulf countries, were other topics that discussed in the visit, Nicos Christodoulides, spokesman said.
The spokesman pointed the importance of bilateral agreements signed on Wednesday and said this visit is the beginning of a new era in cooperation between the two countries.
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