Cyprus and the United Kingdom signed an updated double tax treaty with respect to Taxes on Income and Capital Gains and the Prevention of Tax Evasion and Avoidance on Thursday, the 23rd of March 2018.
The new agreement was signed by Finance Minister Harris Georgiades and British High Commission Matthew Kidd in Nicosia, Cyprus.
The new agreement will replace the existing double tax treaty between the two countries which was signed in June 1974 and entered into force in March 1975. The new tax treaty is waiting ratification and is expected to enter into force as from 1st of January 2019.
The new treaty will contribute to further develop the economic relationship and to enhance the cooperation in tax matters between the two countries.
It based on the OECD Model Tax Convention framework and it applies to taxes on income and on gains from sale of movable or immovable property.
The Treaty covers the following areas in each of the two countries:
- In case of Cyprus the treaty covers corporate and personal income tax, defense tax and capital tax gains.
- In case of the UK, it covers the income and corporation tax and the capital gains tax.
The new treaty provides the following:
- No withholding tax on dividends, where the recipient is the beneficial owner of the income; except where the dividends are paid out of income derived directly or indirectly from immovable property by an investment vehicle.
- No withholding tax on interest and royalty payments; with the condition that the recipient of the interest or royalties is the beneficial owner of the income.
- Gains from the sale of property rich companies are taxed in the country where the property is located.
Under the new treaty there is a limitation of benefits provision, which provides that no benefit will be granted in respect of an item of income or capital gain if it is reasonable to conclude that obtaining that benefit was the main purpose of the business that resulted directly or indirectly that benefit.
The Cypriot Government is continuously upgrading and expanding its already wide network of Double Tax Treaties, thus making the country an attractive place of business.
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