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Cyprus Signs New Double Tax Treaty with Iran

Cyprus-Sings-New-Double-Tax-Treaty-with-IranCyprus has added Iran on its list of double taxation agreements at the beginning of August. The new treaty for the avoidance of double taxation follows the Organization of Economic Co-operation and Development Model and is meant to increase the economic collaboration between Cyprus and Iran. Our Cypriot lawyers can provide you with more information about the country’s double taxation treaties.

What does the new Cyprus-Iran double tax treaty contain?

The double tax treaty between Cyprus and Iran was signed on August 4th and will be enforced beginning with January the 1st of 2016 once it will be ratified by both countries. The agreement contains a protocol for prevention and restriction of tax evasion and it is considered to establish the foundation for a successful economic cooperation between the two countries, but also to grant Cyprus access to other Islamic countries.

The first chapters of the Cyprus-Iran double taxation agreement define the term “permanent establishment”. Under the agreement any Iranian or Cypriot company owning a building, a construction site, factory or installation project or simply conducting supervisory activities for at least 12 months in the other country is considered a permanent establishment and its earnings will be taxed at reduced rates or exempt from taxation according to the provisions of the treaty.

Taxation under the Cyprus-Iran double taxation agreement

The double taxation agreement between Cyprus and Iran also contains details about the taxation of revenue generated in both countries. Dividends will be taxed in Cyprus or Iran as it follows:

  • - 5% on the gross amount if the recipient is a company owning at least 25% of the share capital of the company paying the dividends,
  • - 10% in all other situations.

A particularity of the agreement is that partnerships do not fall under the reduced taxation of dividends provision.

With respect to interest, the tax will not exceed 5% of the gross amount if the recipient is the beneficial owner of the amount, while royalties will be taxed at maximum 6% of the gross amount if the recipient is the beneficial owner. In regards to capital gains, the Cyprus-Iran double tax treaty specifies that the tax can be withheld in the other country.

For additional information about the double taxation agreement with Iran, please contact our law firm in Cyprus.



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