IN635 Attractive Cyprus Double Tax Treaties: United Kingdom, Ukraine and Kazakhstan

A key Double Tax Treaty (DTT) came into force between Cyprus and the UK in 2019. In addition, two new Cyprus DTTs came into force early 2020, with Ukraine and Kazakhstan. 

This Article highlights the most important features of each treaty. If you would like further detail and information regarding any relevant exceptions please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com. 

Cyprus-UK Double Tax Treaty 

A new DTT between Cyprus and the UK, came into force, in the first half of 2019 (at slightly different times in Cyprus and in the UK).

The new DTT will not be affected by the UK’s exit from the EU.

Withholding Tax (WHT) 

  • 0% WHT on dividends, interest and royalties; an exemption may apply to dividends from certain investment vehicles, 

Cyprus-Ukraine Double Tax Treaty

The new DTT has been effective since January 1st, 2020.

Most Favoured Nation Clause

If at any time, after July 2nd 2015, Ukraine has or does enter into a DTT with another country, to grant a tax exemption or provide a lower tax rate on dividends, interest or royalties, and/or more favourable provisions relating to capital gains, Cyprus has the right to renegotiate the relevant articles of the DTT, for the purposes of applying the same exemption or reduced rates or more favourable provisions.

Withholding Tax 

  • 5% WHT where the recipient of the dividend is a company (other than a partnership) directly holding at least 20% of the share capital of the dividend paying company, and this recipient company has invested at least €100,000.
  • 0% WHT on dividend payments to non-Cyprus tax residents. 

Interest

  • 5% WHT.
  • 0% WHT on interest payments to non-Cyprus tax residents.

Cyprus-Kazakhstan Double Tax Treaty 

On January 17th 2020, the Cyprus-Kazakhstan Double Tax Treaty (DTT) came into force, its provisions will commence as from 1 January 2021. 

Withholding Tax

  • 5% WHT where the recipient of the dividend is a company (other than a partnership) holding directly at least 10% of the share capital of the dividend paying company.
  • 0% WHT on dividend payments to non-Cyprus tax residents. 

Interest

  • 10% WHT on interest payments.
  • 0% WHT where the beneficial owner of the interest income is the Government of Kazakhstan, a political subdivision, a central or local authority, the Central Bank or another financial institution wholly owned by the Government.
  • 0% WHT on interest payments to non-Cyprus tax residents.

Royalties

  • 10% WHT.
  • 0% WHT on royalty payments to non-Cyprus tax residents, with the exception of royalty income earned on rights exercised in Cyprus. 

Capital Gains: Relevant to All Three Treaties 

Capital gains from the disposal of shares are taxed in the country of residence of the individual or entity selling the shares.  

Two exceptions are detailed below, where the tax is applied in the country where capital gains have arisen: 

  • Shares where more than 50% of their value is from immovable property situated in the other country; not applicable for shares traded on an approved Stock Exchange.
  • Shares where their value or the greater part of their value, relates to exploration or exploitation of the seabed or subsoil or their natural resources located in the other country. 

Additional Information

If you require further information as to how any of the three DTTS detailed in this Article could be of benefit, please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com or your usual Dixcart contact.

Categories: Cyprus