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26 May 2017
On May 8 2017 the finance ministers of Cyprus and Luxembourg signed the first double tax agreement between the two countries. Negotiations on the agreement began in 2007. According to the official announcement, the agreement's text is based on the Organisation for Economic Cooperation and Development (OECD) Model Tax Convention for the Avoidance of Double Taxation on Income and on Capital. It incorporates all of the required international standards regarding information exchange and the requirements of the OECD's base erosion and profit shifting project, thus providing predictability and legal certainty.
The agreement's text has yet to be published, but – according to media reports – withholding taxes on dividends will be eliminated if there is at least 10% participation by a tax resident company and limited to 5% if not. Further, withholding taxes on interest and royalties will be eliminated as long as the recipient of the royalties is the beneficial owner of the income. These provisions are in line with the EU Parent-Subsidiary Directive (90/435/EC) and the EU Interest and Royalties Directive (2003/49/EC). Cyprus will impose no withholding taxes on dividends or interest in either case.
The agreement will enter into force once each country has notified the other that its domestic ratification procedures have been completed. Its provisions will take effect on the first day of the following calendar year.
A protocol amending the double tax agreement between Cyprus and San Marino, which has been in force since July 2007, was signed on May 19 2017 in Nicosia. Details of the amendments, which will take effect only when the protocol has been ratified by both countries, have yet to be released.
For further information on this topic please contact Philippos Aristotelous at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email (firstname.lastname@example.org). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.
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