With over 50 double tax agreements signed until now, Cyprus is still negotiating with other countries to conclude more tax agreements. The main purposes Cyprus is signing these double taxation agreements are to avoid certain taxes to be levied twice on the same profit and to provide a more attractive fiscal legislation for foreign investors. While most countries have a well-developed and modern double tax agreements network, Cyprus has recently started to amend its enforced tax agreements and to develop a new legal framework based in the OECD (Organization for Economic Co-operation and Development) Convention Model. Among the latest double tax treaties Cyprus amended is the one with the United Kingdom.
Among the countries Cyprus is currently under negotiations in order to sign a taxation avoidance treaty with is the Netherlands. Most of Cyprus’s double taxation agreements are based on a co-operation with another country so a non-resident individual or company will not be taxed in both countries for the same income. A Cypriot company is usually levied a corporate tax of 10% which is quite advantageous for foreign companies with subsidiaries or branch offices in the country, as based on a double tax treaty, they will only be levied the corporate tax in Cyprus only. Also, Dutch shareholders in Cypriot companies would be exempt from paying the dividend tax in Cyprus. A Cypriot shareholder holding shares in a Dutch company would be taxed on their income in Cyprus.
Most of Cyprus’ double tax treaties usually imply reduced rates or exemptions with respect to the, dividends, interests and royalties taxes. These rates usually vary between 0% and 15%, which is what could be expected in a Cyprus-Netherlands double taxation agreement. According to the tax legislation, foreign individuals are not applied to any withholding taxes on interests, royalties and dividends in Cyprus. The royalties tax usually applies to patents and trademarks in Cyprus. Cyprus also has a very advantageous tax regime for participating holdings.
For complete details about the taxation system and for company registration please contact our lawyers in Cyprus.
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