New taxation treaties of Cyprus
The Cypriot authorities started the summer of 2017 by signing two new double taxation treaties: with Luxembourg and Barbados.
Both treaties are based on the principles of the OECD frame convention.
The Cyprus — Luxembourg treaty was signed in Nicosia. Incidentally, previously Cyprus remained the only EU country that had no double taxation treaty signed with Luxembourg. Today, Luxembourg has treaties with all the EU members.
The agreement with Luxembourg provides for the following rates for taxing the repatriated income:
- Taxation of income on dividends is 0% (if the recipient owns no less than 10% in the capital of the disbursing company) and 5% in all other cases;
- Taxation of income on interest is 0%;
- Taxation of income on royalties is 0% (provided that the recipient of royalty is also the beneficial owner).
At the same time, the treaty between Cyprus and Barbados, also signed earlier this summer, establishes a 0%-rate of taxation on repatriation of all types of income (dividends, interest, and royalty).
Both treaties are expected to go through the process of ratification before the end of 2017 and come into force as of January 1, 2018.