The key provisions of the agreement are summarised below:
- No withholding tax on dividends. Note that certain dividends are exempt from this provision and specifically dividends that are paid out of income derived from immovable property by certain investment vehicles, in which case a withholding tax not exceeding 15% may be imposed.
- No withholding tax on interest payment
- No withholding tax on royalty payments
- Gains derived by a resident of one state from the alienation of shares, other than shares in which there is substantial and regular trading on a Stock Exchange, or comparable interests, deriving more than 50% of their value directly or indirectly from immovable property situated in the other state may be taxed in that other state.
The treaty also highlights that the benefits provided in the tax treaty shall not be granted in the instance where obtaining such benefit was one of the principal purposes of the arrangement, unless it is established that granting that benefit in the said circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.
The treaty will enter into force once both Cyprus and the UK exchange notifications that their formal ratification procedures have been completed.