Double taxation treaties

The development of international trade has increased the issue of double taxation and many countries have entered into agreements with other countries in order to limit taxation. A double taxation treaty enables the offsetting of tax paid in one country against the tax payable in another thus preventing double taxation although the rates and exemptions vary from one country to another. As of January 2010 Cyprus had entered into 45 double taxation agreements, these are listed in the table below. Although Cyprus has fewer DTT’s than some competing EU jurisdictions they are, in many cases, more beneficial such as those with Russia, Eastern Europe and the Middle East.

A significant number of double tax treaties concluded by Cyprus lowers and in some cases eliminates, foreign withholding taxes on dividends, interest, royalties or capital gains. Tax sparing credits (see below) are also prevalent in some jurisdictions.

A list of Double Taxation Agreements which have been concluded and their respective date of enforcement can be found below.

JurisdictionEntry into force date
Austria 10/11/1990
Bulgaria 03/01/2001
Belarus 12/02/1999
Belgium 08/12/1999
Canada 03/09/1985
China 05/10/1991
Denmark 10/04/1982
Egypt 14/03/1995
France 01/04/1983
Germany 11/10/1977
Greece 16/01/1969
Hungary 24/11/1982
India 21/12/1994
Ireland 12/07/1970
Italy 09/06/1983
Kuwait 25/09/1986
Lebanon 14/04/2005
Malta 11/08/1994
Mauritius 12/06/2000
Norway 01/01/1955
Poland 09/07/1993
Romania 08/11/1982
Russia 17/08/1999
South Africa 08/12/1998
Sweden 14/11/1989
Syria 22/02/1995
Singapore 08/02/2001
Thailand 04/04/2000
United Kingdom 01/11/1974
USA 31/12/1985
Serbia* 08/09/1986
Montenegro* 05/11/2008
Slovenia* 08/09/1986
Slovakia** 30/12/1980
Czech Republic** 30/12/1980
Azerbaijan*** 26/08/1983
Armenia*** 26/08/1983
Kyrgyzstan*** 26/08/1983
Moldavia 03/09/2008
Tadzhikistan*** 26/08/1983
Uzbekistan*** 26/08/1983
Ukraine*** 26/08/1983
Seychelles 27/10/2006
San Marino 18/07/2007
Qatar 20/03/2009

* The treaty between Cyprus and the Socialist Federal Republic of Yugoslavia is still in force.

** The treaty between Cyprus and the Czechoslovak Socialist Republic is still in force. The treaty has ceased to apply between Cyprus and Czech Republic as from 01/01/2010 (date of application for the provision of the new agreement).

*** The treaty between Cyprus and the Union of Soviet Socialist Republics is still in force.

Tax Sparing Credits:

Tax sparing is a tax treaty provision whereby the contracting state agrees to grant relief from from resident taxation with respect to source taxes that have not actually been paid (taxes that have been ‘spared’). Tax sparing provisions can provide significant scope for international tax planning.

Tax sparing credit provisions can be found in the treaties concluded with the following countries;

Canada, China, Czech Republic, Slovakia, Denmark, Egypt, Germany, Greece, India, Ireland, Italy, Malta, Mauritius, Poland, Romania, Russia, Syria, Thailand, UK, Yugoslavia.

The taxes that are all or partly spared are as follows:

  • Tax on interest paid on loans for economic development in Cyprus (Canada, Denmark, Germany, France, UK).
  • Tax relieved because of deductions in respect of investment in Cyprus (Canada, UK).
  • Tax on interest or profits which is unpaid because of tax incentives, reliefs or exemptions in Cyprus (Czech Republic, Greece, Ireland, Romania, Slovakia, Yugoslavia).
  • Tax not withheld on dividends (15%) if the exemption is given for the purpose of economic development in Cyprus (Denmark, Germany, France).

If you require a copy of the double taxation agreements between Cyprus and any of the above countries please contact us.

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