Contents. Andreas Athinodorou Managing Director International Tax Planning

Transcription

1 Seize the advantage of our expertise Technical Newsletter This publication should be used as a source of general information only. For the specific applications of the Law, professional advice should be sought. Our directors would be glad to address any questions you may have. Cyprus Double Tax Treaties Contents Page Table of Cyprus Double Tax Treaties 2 DTT Notes 3 Tax Sparing Credit Provisions 4 Andreas Athinodorou Managing Director International Tax Planning Marina Zevedeou Director Tel. No.: Fax No.: info@aspentrust.com Website: Seize the Aspen advantage

2 Table of Cyprus Network of Double Tax Treaties Received in Cyprus Paid from Cyprus Treaty Countries Dividends Interest Royalties Dividends (1) Interest (1) Royalties (1,2) % % % % % % Austria Belarus 5 (18) (18) 5 5 Belgium 10 (8) 10 (6,19) 0 10 (8) 10 (6,19) 0 Bulgaria 5 (23) 7 (6,24) 10 (24) 5 (23) 7 (6) 10 Canada (4) 10 (5) (4) 10 (5) China Czech Republic (26) (6) 5 (7) (6) 5 (7) Denmark 10 (8) 10 (6) 0 10 (8) 10 (6) 0 Egypt France 10 (9) 10 (10) 0 (3) 10 (9) 10 (10) 0 (3) Germany 10 (8) 10 (6) 0 (3) 10 (8) 10 (6) 0 (3) Greece 25 (11) 10 0 (12) (12) Hungary 5 (8) 10 (6) (6) 0 India 10 (9) 10 (10) 15 (15) 10 (9) 10 (10) 10 (16) Ireland (12) (12) Italy Kuwait (6) 5 (7) (6) 5 (7) Lebanon 5 5 (10) Malta Mauritius Norway 0 (13) Poland (6) (6) 5 Romania (6) 5 (7) (6) 5 (7) USSR (20) Russia (New treaty) 5 (17) (17) 0 0 Seychelles Singapore 0 10 (6,25) (6,25) 10 Slovak Republic (26) (6) 5 (7) (6) 5 (7) South Africa Sweden 5 (8) 10 (6) 0 5 (8) 10 (6) 0 Syria 0 (8) 10 (4) 10 0 (8) Thailand (21) 5 (22) (21) 5 (22) United Kingdom 15 (14) 10 0 (3) (3) United States 5 (9) 10 (10) (10) 0 Yugoslavia (27) Non Treaty Countries N/A N/A N/A (3) 2

3 Double Tax Treaties - Notes Dividends, interest and royalties are paid by a Cyprus International Business Company without any withholding tax in all cases. (1) Under the Cyprus legislation there is no withholding tax on dividends, interest, royalties paid to non-residents of Cyprus. (2) In the case where the royalties are earned on rights used within Cyprus there is a withholding tax on 10%. (3) 5% on film and TV royalties. (4) Nil if paid to a Government or for export guarantee. (5) Nil on literary, dramatic, musical or artistic work. (6) Nil if paid to the Government of the other state. (7) This rate applies for patents, trademarks, designs or models, plans, secret formulas or processes, or any industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. (8) 15% if received by a company controlling less than 25% of the voting power. (9) 15% if received by a company controlling less than 10% of the voting power. (10) Nil if paid to a Government, bank or financial institution. (11) The treaty provides for withholding taxes on dividends but Greece does not impose any withholding tax in accordance with its own legislation. (12) 5% on film royalties. (13) 5% if received by a company controlling less than 50% of the voting power. (14) This rate applies to individual shareholders regardless of their percentage of shareholding. Companies controlling less than 10% of the voting shares are also entitled to this rate. (15) 10% for payments of a technical, managerial or consulting nature. (16) Treaty rate 15%, therefore restricted to Cyprus legislation rate. (17) 10% if dividend paid by a company in which the beneficial owner has invested less than US$100,000. (18) If investment is less than euro, dividends are subject to 15% withholding tax, which is reduced to 10% if the recipient company controls 25% or more of the paying company. (19) No withholding tax for interest on deposits with banking institutions. (20) Armenia, Azerbaijan, Kyrgyzstan, Moldova, Tajikistan, Ukraine and Uzbekistan apply the USSR/Cyprus treaty. (21) 10% on interest received by a financial institution or when it relates to sale on credit of any industrial, commercial or scientific equipment or of merchandise. (22) This rate applies for any copyright of literary, dramatic, musical, artistic or scientific work. A 10% rate applies for industrial, commercial or scientific equipment. A 15% rate applies for patents, trade marks, designs or models, plans, secret formulas or processes. (23) This rate applies to companies holding directly at least 25% of the share capital of the company paying the dividend. In all other cases the withholding tax is 10%. (24) This rate does not apply if the payment is made to a Cyprus international business entity by a resident of Bulgaria owning directly or indirectly at least 25% of the share capital of the Cyprus entity. This provision is now ineffective since the Cyprus tax regime does not allow for international business companies as from 1 January The transitional period for existing international business companies expires on 31 December (25) 7% if paid to bank or financial institution. (26) The new countries of Czech Republic and Slovakia have agreed to be bound by the treaty, which was entered into with Czechoslovakia. (27) Slovenia, Montenegro & Serbia apply the Yugoslavia/Cyprus Treaty. (28) In addition to the treaties in force, treaties with the following countries have reached the following stage: Negotiations in progress: Algeria, Estonia, Finland, Georgia, Iceland, Indonesia, Iran, Latvia, Libya, Lithuania, Malaysia, Moldova, Netherlands, Portugal, Qatar, San Marino, Spain, Sri Lanka and Ukraine Negotiations will commence soon: Bangladesh, Brazil, Gabon, Jordan, Kazakhstan, Morocco, Pakistan and Vietnam Negotiations for revision of existing agreements: Armenia, Czech Republic, Denmark, France, Germany, Greece, India, Ireland, Italy, Norway and Yugoslavia 3

4 Tax Sparing Credit Provisions The Cyprus double tax treaties contain the following tax sparing credit provisions: Canada There are tax sparing credit provisions in Canada in respect of Cyprus tax, which would have been payable or deductible in Cyprus on profits or interest but for certain tax incentive exemptions or relief in Cyprus. Czech Republic and Slovakia In Czech Republic and Slovakia, there are tax sparing credit provisions in respect of Cyprus tax which would have been payable on profits and interest in Cyprus but for tax incentive exemption or relief in Cyprus, and in respect of Cyprus tax which would have been deductible from any divided paid out of profits granted such incentive exemption or relief. Denmark In Denmark, there are available tax sparing credits of 15% for dividends and 10% for interest from Cyprus, if for purposes of promoting the economic development of Cyprus there is an exemption from or reduction of tax below the above percentages. Egypt There are tax-sparing provisions in respect of tax which would have been payable but reduced or waived under the legal provisions of either contracting State for tax incentives. Germany In Germany, tax sparing credits of 15% for dividends and 10% for interest are available, if there is an exemption from or reduction of tax below the above percentages, as a result of incentives for promoting economic development in Cyprus. Greece In both countries, tax sparing credits are available for the whole of any tax which would be payable in respect of any profits or interest for which relief or exemption from tax is allowed as a tax incentive, and in respect of any tax, which would be withheld from any dividends, paid out of profits for which relief or exemption from tax is allowed as a tax incentive. India In both countries, tax sparing credits are available for the whole of any tax which would be payable but for incentive relief designed to promote economic development. Withholding tax shall be deemed to have been paid on the gross amount of: dividends at 10% or 15%, as the case may be, interest at 10%, royalties and fees for included services at 15% and technical fee at 10%. Ireland In both countries, tax sparing credits are available for profits, interest and dividends which are exempt from tax or taxed at reduced rates due to tax incentive provisions of each State. In addition, in Ireland there are tax sparing provisions in respect of profits from the operation of ships under the Cyprus flag. Italy Tax wholly relieved or reduced for a limited period of time under the laws of either contracting State shall be deemed to have been paid for tax credit purposes in the other State. In the case of Italy, these would include the full tax exemption in the case of operations of ships under the Cyprus flag and Cyprus international companies. 4

5 Malta incentive relief. Withholding tax shall be deemed to have been paid on the gross amount of: dividend at 15%, interest and royalties at 10%. Poland incentive relief. Withholding tax shall be deemed to have been paid on the gross amount of: dividends and interest at 10%, and royalties at 5%. Romania In Romania, there are tax sparing credit provisions in respect of Cyprus tax which would have been payable in Cyprus on profits or interest but for tax incentive exemption or relief in Cyprus, and in respect of Cyprus tax which would have been deductible from any dividend paid out of profits granted tax incentive exemption or relief in Cyprus but for such tax incentive exemption or relief. Syria incentive relief. Withholding tax shall be deemed to have been paid on the gross amount of: dividends and royalties at 15% and interest at 10%. United Kingdom In the UK tax sparing credits are available in respect of tax saved as a result of tax incentives given in Cyprus on interest paid, provided the loan was made for the purposes of promoting development and in respect of investment allowances on capital expenditure for specific types of investment. Yugoslavia There are tax sparing credit provisions in respect of tax, which would have been payable but reduced or waived under the legal provisions of either contracting State for tax incentives. ooooooooo 5