Luxembourg-Cyprus Double Tax Treaty Enters Into Force

Brief details of the DTT, which is based on the OECD Model Convention, are as follows:

Dividends

Cross-border dividends payments are to be subject to 0% withholding tax at source if the beneficial owner is a company which holds directly at least 10% of the capital of the company paying the dividends.

In all other cases, dividends payments are to be subject to a 5% withholding tax.

Interest

Cross-border interest payments are generally to be taxable only in the country of the recipient of the income – i.e. no withholding tax being levied at source; subject to certain EU anti-avoidance provisions.

Royalties

Royalty payments are generally to be taxable only in the country of the recipient of the income – i.e. 0% withholding tax at source.

Capital Gains

Like many DTTs, provisions now cover gains resulting out of the sale of immovable property and property-rich companies, which are taxed in the country where the immovable property is located.