In summary

On 27 October 2023 Cyprus ratified the new Double Tax Treaty with the Republic of Croatia (the "Treaty").

The Treaty was signed on 17 October 2023 by the Cyprus and the Croatian Ministers of Finance. As announced by the Cyprus Ministry of Finance on that day, the Treaty is based on the OECD Model Tax Treaty and incorporates the Base Erosion and Profit Shifting ("BEPS") minimum standards.

Following the ratification by Cyprus, the Treaty will be in effect in the year following the year in which the ratification process in the Republic of Croatia is also completed. Once into effect, the Treaty will replace the existing Double Tax Treaty between Cyprus and the Socialist Federal Republic of Yugoslavia, which was in force after its dissolution.

Below is a summary of the main provisions of the Treaty.


A 5% withholding tax applies to the recipient/beneficial owner of the dividends.


A 0% withholding tax applies if the interest is paid to a recipient/beneficial owner of the other Contracting State:

  • in connection with the sale on credit of any industrial, commercial or scientific equipment;
  • in connection with the sale on credit of any merchandise by one enterprise to another enterprise; or
  • on any loan of whatever kind granted by a bank.

A 5% withholding tax applies in all other cases.


A 5% withholding tax applies to the recipient/beneficial owner of the royalty.

Capital Gains

Gains derived by a resident of a Contracting State from the alienation of shares or comparable interests, such as interests in a partnership or trust, deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State at any time during the 365 days preceding the alienation, may be taxed in that other State.

Exceptions apply to gains derived from alienation of shares:

  • listed on an approved stock exchange;
  • in the course of a corporate reorganization;
  • when the alienator is a recognized pension fund.

Limitation to benefits

A benefit under this Treaty shall not be granted in respect of an item of income or capital, 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 any 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.