Cyprus Double Tax Agreements Update

Cyprus – Bahrain Double Tax Treaty

On the 9th of March 2016 the double tax treaty between Cyprus and the kingdom of Bahrain was signed which will apply as of 1st of January 2017. The key amendments of the agreement, which follows the OECD model convention, are summarised below:

• Permanent establishment means a building site or construction or installation project or any supervisory activities in connection with such a site or project if it lasts more than 12 months.
• No withholding tax on dividend
• No withholding tax on royalties
• No withholding tax on income from debt claim

It should be noted that there is no withholding tax on dividends, interest or royalties in Bahrain and the treaty states that should Bahrain decide to impose withholding taxes in the future, then there will be no withholding taxes to Cypriot residents.

Cyprus – Latvia Double Tax Treaty

On the 24th of May 2016 the double tax treaty between Cyprus and Latvia was signed which will apply on the 1st of January of the year after the treaty comes into force. The key amendments of the agreement, which follows the OECD model convention, are summarised below:

• Permanent establishment means a building site or construction or installation project or any supervisory activities in connection with such a site or project if it lasts more than 9 months as opposed to 12 months as per the OECD model.
• 0% withholding tax on dividends and interest payable to a company resident in the other contracting state that is the beneficial owner of the dividend/interest and in all other cases a 10% withholding tax is imposed
• 0% withholding tax on royalties payable to a company resident in the other contracting state that is the beneficial owner of the royalties and in all other cases a 5% withholding tax is imposed.

Note that under the Cyprus tax legislation there is no withholding tax on dividend payments in and out of Cyprus to non- residents.

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