On 31 December 2021 Cyprus ratified the first ever concluded Double Tax Treaty with the Hashemite Kingdom of Jordan (the "Treaty").
The Treaty was signed on 17 December 2021 and, as announced by the Cyprus Ministry of Finance on that day, it is based on both the OECD Model Tax Convention on Income and on Capital and the United Nations Model Double Taxation Convention. The Treaty incorporates the Base Erosion and Profit Shifting ("BEPS") minimum standards.
The Treaty will be in effect in the year following the year in which the ratification process in the Hashemite Kingdom of Jordan is completed. Assuming the ratification process is completed during the current year, the Treaty is expected to be in effect as from January 1st, 2023.
Below is a summary of the main provisions of the DTT:
A 5% withholding tax applies if the recipient/beneficial owner of the dividend is a company (other than a partnership) holding directly at least 10% of the paying company's capital.
A 10% withholding tax applies in all other cases.
A 0% withholding tax applies if the recipient/beneficial owner of the interest is:
- the Government or a political subdivision or a local authority;
- the National bank.
A 5% withholding tax applies in all other cases.
Royalties or fees for technical services
A 7% withholding tax applies to the recipient/beneficial owner of the royalty / fee for technical services.
Gains derived by a resident of a Contracting State from the alienation of shares in a company deriving more than 50% of their value directly from immovable property situated in the other Contracting State, and only those gains attributable to the immovable property, may be taxed in that other State.
An exemption applies for the alienation of shares listed on an approved stock exchange.
Gains derived by a resident of a Contracting State from the alienation of shares in a company deriving their value or greater part of their value directly or indirectly from exploration or exploitation rights; or from property situated in the other Contracting State and used in the exploration or exploitation of the seabed or subsoil or their natural resources situated in the other State; or from such rights and such property taken together, may be taxed in that other State.
Entitlement to benefits
A benefit under this Treaty shall not be granted, in respect of an item of income, if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes (Principal Purpose Test) of the arrangement or transaction that resulted directly or indirectly in that benefit.
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.