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What does the double tax treaty between Cyprus and the United Kingdom cover?
The double taxation agreement (DTA) between Cyprus and the United Kingdom was first signed in 1974 and was amended in 1980. The Convention between the two countries was concluded in order to avoid the double taxation and to prevent tax evasion with respect to the taxable incomes of individuals and companies in Cyprus and in the United Kingdom. The double taxation agreement between Cyprus and the UK cover the following types of taxes:
- the income tax in Cyprus and the UK,
- the corporate tax in the UK.
The agreement will also apply to other similar taxes, such as the taxation of dividends, interest and royalties in both countries.
The fiscal residence of the taxpayers
The double taxation agreement applies to all the residents of the contracting states, in this case, Cyprus and the United Kingdom. The term “tax resident” applies to individuals by reason of domicile or residence and to English and Cypriot companies by reason of place of management. For resident citizens of both countries, the taxes will apply depending on the country the citizen has a permanent home in.
With respect to English and Cypriot companies, the Convention defines the term “permanent establishment” as the place of business of the enterprise. In this case, one can distinguish the following types of permanent establishments:
- the place of management of the company,
- a company’s branch office in Cyprus or UK,
- a company’s office,
- a factory or workshop,
- any immovable property held by a company within a country for more than six months,
- mines, oil wells, quarries, farms.
For information about the places of business not deemed permanent establishments you can ask our lawyers in Cyprus.
What are the tax rates applicable under the DTA between Cyprus and the UK?
Individuals and companies will be imposed the income or corporate tax depending on their place of residence, as mentioned above. However, English and Cypriot companies’ permanent establishments will be taxed at source in the country in which they carry out business operations. With respect to the taxes applied to other incomes, the DTA establishes for incomes received in Cyprus by non-residents the following tax rates:
- dividends will be taxed at 15%,
- interests will be taxed at 10%,
- royalties will be exempt from taxation.
The withholding taxes on applied to incomes paid from Cyprus are:
- 0% for dividends,
- 10% for interests,
- 0% for royalties.
However, depending on certain requirements applied to companies other exemptions or reduced tax rates may apply. For detailed information about the double tax treaty with the United Kingdom we invite you to contact our Cypriot law firm.