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The double taxation agreement between Cyprus and Switzerland
Cyprus and Switzerland have signed their first double taxation agreement in July, 2014. The treaty covers the taxation of income and capital in both countries and is meant to increase economic relations between Cyprus and Switzerland. The agreement has been ratified by Cyprus only, and will be enforced as soon as Switzerland also ratifies it. The agreement was prepared in accordance with the Organization for Economic Co-operation and Development model. The Cyprus-Switzerland double tax treaty covers the following taxes:
- the income, the corporate, the special contribution for defense, capital gains and the immovable property taxes in Cyprus,
- the federal, cantonal and municipal income tax, the corporate tax and the capital gains tax in Switzerland.
The agreement also covers any similar taxes levied in both contracting states. Any income which is taxed at source and lottery prizes are excluded from the double tax treaty between Cyprus and Switzerland.
Permanent establishments under the Cyprus-Switzerland double tax treaty
Article 5 in the double taxation treaty between Cyprus and Switzerland establishes that a Swiss or Cypriot company carrying out business activities in the other state for more than a calendar year will be deemed permanent establishment. In this category were included building and construction sites, branch offices and any other places of management.
The Cyprus-Switzerland double taxation treaty also establishes that any agent concluding contracts on behalf of a Swiss or Cypriot company will be considered to have a permanent establishment in the country.
Tax rates under the Cyprus-Switzerland double taxation treaty
The Cyprus-Switzerland double taxation agreement provisions that no withholding taxes will apply on interests and royalties payments. With respect to dividends the following taxes rate apply:
- 0% if the recipient owns at least 10% for a minimum period of one year of the share capital in company paying the dividends,
- 15% in all other cases.
Cyprus does not levy any dividend tax, except for certain payments established under the treaty with Switzerland.
For updated information about the double taxation treaty with Switzerland you can contact our law firm in Cyprus.