A RECENT visit to Saudi Arabia by president of Cyprus, Nicos Anastasiades, has seen the signing of a Convention for the avoidance of double taxation with respect to taxes on income and for the prevention of tax avoidance between the two countries (the “Treaty”) which is set to come into force as of January 2019.
Having already initiated a successful series of bilateral agreements being signed between the two countries, the president’s visit is set to further develop economic relations between Cyprus and the Gulf countries as well as strengthen its status as a business centre on the global economy map.
According to Al-Jadaan, this treaty will further consolidate tax related matters between Saudi Arabia and Cyprus, while the Cyprus’s Government Spokesman, Nicos Christodoulides, described the visit as the beginning of a new era in cooperation between the two countries.
The signing of the Treaty is aimed at the avoidance of double taxation as well as the prevention of tax evasion between Cyprus and Saudi Arabia, which applies to income tax and on income from the transfer of movable or immovable property and is based on the OECD Model tax convention.
The Treaty covers different areas in the financial sector of each of the two countries. In the case of Cyprus, it applies to corporate and personal income tax, defence tax and capital gains tax. In regards to Saudi Arabia, the treaty covers the Zakat and the income tax, including the natural gas investment tax.
- With regard to Dividends, the Treaty provides that the withholding tax is 5%, but no withholding tax will be applied to cases where there is at least a 25% participation by a company that is tax resident in the receiving jurisdiction.
- There is no withholding tax on Interest, paid by a company resident in one contracting state to a company resident in the other contracting state.
- Royalties will be subject to 5% withholding tax on the use of industrial, commercial or scientific equipment and 8% withholding tax in all other cases.
- Capital Gains arising from the disposal of shares derived from a substantial participation in the capital of a company which is resident of a contracting state may be taxed in that contracting state. A person is considered to have a substantial participation when their participation amounts to least 25% of the capital of the company, at any time within 12 months prior to the disposal of the shares.
Upgrading and expanding the network of Double Taxation Conventions, is of high economic importance and aims to further strengthen Cyprus as an international business centre.
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