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Cyprus signed Double taxation agreement with Spain
Saturday, April 13, 2013
 

 

Minister of Finance of the Republic of Cyprus and the Spanish ambassador signed on 14th February 2013 a double taxation agreement between Spain and Cyprus. The treaty will enter into force three months after its ratification and for taxes on income and capital at the beginning of the year following the date the treaty enters into force.

 

The agreement has been under negotiation for several years. Cyprus was included in the Spanish authorities' so-called black list of tax havens, despite the fact that it complied with all relevant information exchange requirements, resulting in Cyprus-resident companies being denied certain Spanish tax benefits and exemptions. In 2009 the Spanish authorities removed the restrictions and progress in the negotiations regarding the double taxation agreement resumed.

 

The signing of the agreement is expected to lead to a substantial expansion of economic ties and reciprocal investment activities between the two countries. The agreement, like all of Cyprus's double tax agreements, is based on the OECD Model Treaty.

 

The most significant provisions of the treaty are as follows:

 

Permanent Establishment

• The permanent establishment definition included in the treaty is in line with the meaning provided in the OECD model tax convention. In particular, any building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 12 months.

 

Dividends

• 0% withholding tax applies if the beneficial owner is a company (other than a partnership) holding at least 10% of the capital of the company paying the dividend.

• 5% applies in all other cases.

 

Interest

• 0% withholding tax.

 

Royalties

• 0% withholding tax applies with respect to copyrights of literary, artistic or scientific work including films, any patent, trademark, secret formula or process or for information concerning industrial, commercial or scientific experience.

 

Capital Gains

• Gains from the disposal of immovable property are taxed in the country where the immovable property is situated.

• Gains from the disposal of shares or comparable interests not listed on the Stock Exchange of either country (deriving more than 50% of their value from immovable property), are taxed in the country in which the immovable property is situated. For the purposes of determining the value referred to above, the domestic law of the country where the immovable property is situated applies.

• Gains from the disposal of any other type of shares are taxed in the country of which the seller is resident.

 

The signing of the tax treaty together with the removal of Cyprus from the so called Spanish “black list” should encourage investments between the two countries and will effectively reduce Spanish withholding taxes.

 

Should you require more information regarding the above please to do not hesitate to contact us at: info@istosglobal.comor +357 22 256324.


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