Cyprus-Germany Double Taxation TreatyUpdated on Tuesday 22nd September 2015
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Taxes covered by the Cyprus-Germany double tax treaty
The first double taxation agreement (DTA) Cyprus and Germany have signed was ratified in 1974. The agreement establishes that its provisions apply to both German and Cypriot citizens with respect to certain taxes within both countries. In the case of Germany, the double taxation applies to the following taxes:
- - the income tax,
- - the corporate tax,
- - the surcharge applied to the income and corporate taxes,
- - the capital gains tax,
- - the trade tax.
In the case of Cyprus, the double taxation agreement applies to the income tax. The taxation agreement also applies to German and Cypriot companies.
The new double taxation agreement between Cyprus and Germany
At the beginning of 2011, Cyprus and Germany have revised their double taxation agreement and have amended it in order to correspond to the 2003 Organization of Economic Co-operation and Development (OECD) model. Additionally, provisions about the prevention of fiscal evasion were added. The new Germany-Cyprus double taxation treaty was improved and provides better tax treatment for the taxation of dividends in both Cyprus and Germany and it also contains new regulations about the exchange of tax information. Starting with 2011 the term “beneficial owner” was introduced in the tax treaty and shipping activities are defined.
New provisions included in the Cyprus-Germany DTA
One of the articles the Cyprus-Germany double taxation treaty was amended with contains provisions about shipping, water and air transport. The new agreement establishes that the profits of German or Cypriot companies will be taxed in the country where the company’s management is established. The agreement also provisions that profits from rental of ships and aircraft will be taxed.
The new double taxation agreement repeals the provision according to which Cypriot companies or partnerships are taxed in Germany if 25% of the company is owned by a foreign citizen. The taxation of dividends has also been amended with the participation exemption clause, which establishes a company paying dividends to an individual owning at least 10% of the voting shares will be taxed at a 5% rate, while in all other cases, the tax rate is 10%. With respect to interests, these will only be taxed in the country of residence of the beneficial owner.
For more information about the new provisions of the double taxation agreement with Germany, please contact our Cypriot lawyers.