Cyprus – Italy Double Tax Treaty

Cyprus – Italy Double Tax Treaty

Updated on Tuesday 02nd May 2017

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cyprus-italy-double-tax-treaty.jpgThe Cyprus – Italy double tax treaty was concluded in 1974 and its scope is the avoidance of double taxation, as well as fiscal evasion prevention in regards to income taxes. It was followed by an additional protocol signed between the two countries in 2010, which views the banking and other information exchange based on the Organization for Economic Cooperation and Development Model Tax Convention. Our lawyers in Cyprus can provide detailed information regarding this Convention.

Business profit taxation under the Cyprus – Italy double tax treaty

According to the Cyprus – Italy double tax agreement, business profits in the two contracting jurisdictions are taxed as follows:
The profits of a business which undertakes its activities in one of the contracting jurisdictions will be taxed only in that country, except for when it carries on activities in the other country through a permanent entity;
If a business has activities in the other jurisdiction through a permanent establishment, it will be attributed in each jurisdiction the profits that it could gain if it was an independent company with similar activities, in similar conditions. Our Cypriot lawyers can offer further details on this subject;
When determining the profits of a permanent entity, there are certain expense deductions which are allowed.

How are dividends taxed in Cyprus?

Under the Cyprus – Italy double tax agreement, dividends received in Cyprus are taxed at a flat rate of 15%.

The additional protocol between Cyprus and Italy

The additional protocol between Cyprus and Italy states, among others, that the existent article “Allowance of deduction or credit” is entirely replaced by a new one on the “Elimination of Double Taxation”.
Italy offers a tax credit against tax payable in Italy in regards to taxes imposed in Cyprus on income, which is taxable in Cyprus. At the same time, the tax credit shall not surpass the Italian tax duties attributed to the specific income. Our attorneys in Cyprus can give you more details on this matter.
We invite you to get in touch with our law firm in Cyprus if you need legal advice in this country or if you request further information on the agreement between Cyprus and Italy.