The Cyprus Double Tax Treaties

The Cyprus Double Tax Treaties

In addition to the key geographical position of the Island, the excellent infrastructure, the significant tax and other incentives provided and the factors already explained, the wide and increasing network of double tax treaties allows Cyprus to be considered as one of the most attractive International Business Centres in the World.

Cyprus has entered into several double taxation agreements with a number of countries for the avoidance of double taxation of income. All the East European countries namely Bulgaria, Czech Republic, Slovakia, Hungary, Poland, Romania, Russia and Serbia have double taxation treaties with Cyprus.

Double tax treaties are also currently in force with, Austria, Canada, China, Denmark, Egypt, France, Germany, Greece, India, Ireland, Italy, Kuwait, Malta, Norway, Sweden, Syria, United Kingdom and United States. A number of other treaties are currently under negotiation or awaiting ratification or signature.

The majority of these treaties follow the OECD (Organisation for Economic Cooperation and Development) model.

The existence of this extensive and increasing network of double tax treaties offers considerable scope for tax planning for the Cyprus International Business entities. Under these agreements, a credit is usually given against the tax levied by the contracting country in which the taxpayer resides. The advantage of this is that tax is normally paid only at the higher of the two rates.

Eastern European Countries

Cyprus has double tax treaties with all Eastern European Countries and this offers considerable advantages when using Cyprus in order to extract business profits from these countries. Taking into consideration the continuing increase of trading activities involving Eastern European countries and other countries in the World the use of Cyprus International Business Companies is a great opportunity for minimizing tax liabilities.

Examples where Cyprus tax treaties can be used to take advantage of trading with Eastern European countries include:

• The establishment of a subsidiary company in Cyprus by a company in a country that has no treaty with Eastern Europe
• The use of a Cyprus International Business Company to distribute interest and royalties to countries which do not tax dividends from foreign subsidiaries
• A Cyprus International Business Branch whose management and control are in Cyprus, may be established by a company in a country which do not tax at all, or in full business profits of foreign branches

Business Profits under Double Tax Treaty

Under the Cyprus double tax treaty agreements, no business profits of Cyprus resident entity are taxed by a treaty country unless the entity maintains a permanent establishment in the other country and carries out business in that country through the permanent establishment.

Click here to download the Cyprus Tax Treaty Partners guide or view it below