As of the 22nd of March 2018, Cyprus and the United Kingdom have entered into a new and revised double tax treaty, replacing the previous one which was signed in 1974 and amended by the 1980 Protocol.
The new provisions are widely in correlation with the OECD Model and the primary updates are as follows:
- Withholding taxes will not be subject to dividend, interest or royalty paid by residents of one jurisdiction to residents of the other as long as the recipient is the beneficial owner of the said income. However, under certain circumstances, dividends paid by investment vehicles which are derived from the profits of immovable property may be subject to 15% withholding tax.
- Disposal of shares of property that accumulate capital gains will be subject to taxation in the jurisdiction where the immovable property is located; however this provision is non-applicable to listed shares.
- Pensions are only taxable in the country where the receiver is a tax resident; however this may not always be the case with particular Government Service pensions.
- Tax authorities are required to specify a company’s tax residence through taking into consideration it’s jurisdiction of incorporation and management.
- The new provision to the entitlement of benefits has also been included to prevent transactions whereby their sole purpose is to purely gain the benefits of the said DTT.
The new and revised double tax treaty will enter into force after each State’s legal procedures have been completed and it will take effect in Cyprus as from 1 January of the next calendar year and in the UK (i) for withholding taxes (WHTs) for amounts paid or credited on or after 1 January of the next calendar year, (ii) for income tax and capital gains tax from the next 6 April, and (iii) for corporation tax for any financial year beginning on or after the next 1 April.
The content of this article is intended to provide a general guide to the subject matter. Specific advice for your specific circumstances can be sought from our firm’s experts. For further information or clarifications, please contact Soulla Dionysiou at DP Law at firstname.lastname@example.org / email@example.com / +357 22 272360