The Convention between the Republic of Cyprus and the Kingdom of the Netherlands for the Elimination of Double Taxation with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (known as the Double Tax Treaty (DTT) between Cyprus and the Netherlands) was signed on 1 June and published in the Official Gazette of the Republic of Cyprus on 4 June 2021.
The Cyprus – Netherlands DTT is based on the OECD Model Tax Convention and its key provisions include:
• Dividend Payments: No withholding tax if the beneficial owner is (a) a company holding directly at least 5% of the capital of the company paying the dividends throughout a 365-day period, including the day of the dividend payment, (b) a recognised pension fund, which is generally exempt under the Corporate Income Tax Law of the Republic of Cyprus. In all other cases, a maximum rate of 15% withholding tax applies (Article 10).
• Interest Payments: No withholding tax provided that the recipient of the interest is the beneficial owner of the income (Article 11).
• Royalty Payments: No withholding tax provided that the recipient of the royalty is the beneficial owner of the income (Article 12).
• Capital Gains: Cyprus retains exclusive taxing rights on gains arising from disposals of shares made by Cyprus tax residents, except where the shares derive more than 50% of their value, directly or indirectly from (a) offshore rights or property relating to the exploration and exploitation of the seabed, subsoil or their respective natural resources located in the Netherlands, (b) immovable property situated in the Netherlands. Regarding the latter, Cyprus retains exclusive taxing rights on capital gains derived from disposal of shares: (i) listed on a recognised stock exchange, (ii) as part of a corporate reorganisation, (iii) where the immovable property from which the shares derived their value is immovable property in which the business is carried on, (iv) when the alienator, alone or with related persons, owns 25% or less of the capital or other comparable interests prior to the first alienation of shares, (v) when the alienator is a recognised pension fund in Cyprus (Article 13).
• Entitlement to Benefits: The DTT includes provisions that limit the entitlement to benefits arising thereunder. In particular, the competent Tax Authority of each respective State is entitled to deny a benefit where the obtainment of such benefit was one of the principal purposes of the arrangement or transaction at issue, unless the granting of that benefit would be in accordance with the objectives of the DTT (Article 26).
Click here for the official text of the DTT, as published in the Official Gazette of the Republic of Cyprus in the Greek, Dutch, and English languages.
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