In the framework of the official visit of the President of Cyprus to Saudi Arabia the two states signed a Double Tax Treaty agreement which is expected to contribute to the further development of trade and economic relations between the two States. The Agreement is based on the OECD Model Convention on the Avoidance of Double Taxation on Income and Capital and also provides for the exchange of bank and other information in accordance with the relevant Article of the Treaty.
The Treaty is expected to come into force on 1st of January 2019.
MAIN PROVISIONS OF THE NEW TREATY
The main provisions of the new Treaty are listed below:
Dividends paid by a company which is resident in a contracting state to a resident of the other contracting state will be subject to 0% withholding tax provided that the owner holds at least 25% of the shares of the company paying the dividends. In all other cases the withholding tax rate is 5%.
Interest paid by a Company which is resident in a contracting state to a resident of the other contracting state will be subject to 0% withholding tax.
Royalties arising in a contracting state and paid to a resident of the other contracting state will be subject to 5% withholding tax, provided royalties are paid in respect of industrial, commercial or scientific experience.
In all other cases the withholding tax rate is 8%.
Director's fees and other similar payments received by a resident of a contracting state in his capacity as a member of the board of directors of a company which is a resident of the other contracting state may be taxed in that other state.
This Treaty extents the Double Tax Treaty network of Cyprus to the Arab world and allows Cyprus to become one of the beneficial routes to invest in Saudi Arabia.
The Government of Cyprus is continuously trying to increase the double tax treaty network of Cyprus and position Cyprus as one of the strongest international business hubs.
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