Wednesday, 31 August, 2016

Cyprus and Jersey Successfully Sign Double Tax Treaty

On 11 July 2016, Cyprus and Jersey signed a double tax treaty (DTT), strengthening the commercial and financial ties between the two countries. The agreement is due to come into force on 1 January 2017, provided both countries have concluded their individual ratification procedures by the end of 2016.

As with most of Cyprus’s treaties, this DTT follows the OECD Model Tax Convention, though with some modifications.

Existing taxes covered

In relation to Jersey, the DTT covers income tax; in Cyprus, it covers corporate and personal income tax, defence tax and capital gains tax.

Income

Generally, income will be taxed where the person generating the income is resident (with exceptions for permanent establishments). However, income derived from immovable property will be taxed where the property is located.

Capital gains

Gains realised on the disposal of immovable property will be taxed where the property is located. For movable property connected with a permanent establishment, gains will be taxed in the location of the permanent establishment.

Gains on the disposal of other property (except those relating to ships and aircraft) are taxable where the seller is resident. The DTT is silent on the treatment of gains from the sale of shares in property-rich companies.

Withholding tax

There is no withholding tax in either state on dividends, interest or royalties.

According to Cyprus’s finance minister, ‘Updating, maintaining and expanding the existing network of double taxation avoidance treaties … aims at further strengthening and attracting foreign investment and promoting Cyprus as an international business centre.’

 

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