The European Council on 20 February 2024 decided to remove the Bahamas, Belize, Seychelles and Turks and Caicos Islands from the EU list of non-cooperative jurisdictions for tax purposes.
The whole list includes the following 12 jurisdictions:
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HOW ARE COMPANIES REGISTERED IN CYPRUS AFFECTED BY THIS CHANGE
- DAC6
Cross-border arrangements with an associated enterprise with tax residence in the above-mentioned list will be considered reportable arrangements under hallmark C1bii – "Arrangements that involve deductible cross-border transactions between associated enterprises in cases where the recipient is resident for tax purposes in a jurisdiction of third-country jurisdictions which is assessed as non-cooperative by the EU or OECD."
The Main Benefit Test (MBT) is irrelevant to this hallmark therefore all cross-border arrangements that relate to tax deductible transactions (such payment of interest expense, payment for services received etc) will be considered as reportable and the report must be submitted within the strict deadlines of the law otherwise heave penalties apply.
- Withholding Taxes on outbound Dividend, Interest and Royalty payments
Cyprus companies paying dividend, interest and royalties to
companies who are either:
- tax resident in a jurisdiction mentioned in the above list or
- are registered in these jurisdictions and are not tax resident in a jurisdiction which is not in the above list.
will need to deduct appropriate withholding tax at source at the appropriate rates as indicated in the below table:
| Payment Type | Tax | Conditions |
|---|---|---|
| Dividends | 17% | Provided that the recipient company holds directly, alone or
together with associated companies (which are also resident or
registered in a non-cooperative jurisdiction)
|
| Interest | 30% | Does not apply to interest paid in relation to securities listed in a recognised stock exchange |
| Royalties | 10% |
The above rates will not apply for cases where a double tax treaty provides for reduced withholding tax rates.
The only jurisdiction that Cyprus has double tax treaty from the above list is Russia. Therefore, dividends, interest and royalties paid to Russian companies will be subject to the withholding tax rates of 15%,15%,0% respectively subject to the conditions stated in the double tax treaty between Cyprus and Russia
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.