On July 21st of 2020, the Governments of the Republic of Cyprus and the Swiss Confederation signed a Protocol amending the already existing Convention for the Avoidance of Double Taxation of 2014, regarding Taxes on Income and on Capital. The upgrades introduced by the Protocol are of major economic and political impact, as the Double Tax Treaty is expected to further promote investments to the Republic of Cyprus, positioning it even higher on the EU business checkerboard.
The Protocol establishes the minimum standards of the Base Erosion and Profit Shifting (BEPS) actions of the Organization for Economic Co-operation and Development, regarding bilateral agreements and diverse amendments on which both States have consented on. Moreover, the “Entitlement to Benefits” Article was introduced, along with the “Mutual Agreement Procedure” Article, where concrete wording is used in order to bring more clarity to the Double Tax Treaty.
The Double Tax Treaty of 2014 accentuates on the following points:
I) Withholding Taxation:
a) On Dividends: 15%
b) On Interests: 0%
c) On Royalties: 0%
The aforementioned tax rates are applicable on the gross amount of each category.
II) Capital Gains:
Capital gains deriving from the disposal of real estate are taxable in the State where the property is located.
The amendments regarding the minimum standards, as specified in the Multilateral Convention and introduced by the new Protocol for compliance, include but are not limited to the provisions exposed down below:
I) Preambule:
The Multilateral Convention focuses on the avoidance of the double taxation in terms of taxes on income and on capital. However, the provisions of the Treaty do not leave room for non-taxation ways or reduced taxation ways by means of tax evasion or avoidance.
II) Mutual Agreement Procedure:
The article on the “Mutual Agreement Procedure” provides all individuals with the right to question before the competent authority of either of the contracting States a specific action and/or treatment received in one or even both of the contracting States, leading in taxation which would be considered as contrary to the Multilateral Conventions’ provisions. In the occurrence of such an event, the contracting States are expected to resolve the case. However, in the event that the case is no resolved, the affected party may submit the case to arbitration.
III) Entitlement to Benefits:
The article on the “Entitlement to Benefits” regulates the granting of benefits for legitimate business reasons and in accordance to the provisions of the Treaty. According to the present article, the competent authority of any of the Contracting States may provide treaty benefits, where the rest of the provisions would otherwise deny them, in case it is considered that the structure receiving those benefits did not have the obtention of them as their primary goal.
The present article is for informational purposes only and does not, under any circumstances, constitute legal advice. For further information on the matter, please contact Arsen Theofanidis LLC and one of our legal advisors shall be glad to assist you.
N. Kalifatidou
Advocate – Legal Consultant
Arsen Theofanidis LLC