Cyprus Profile

The Double Tax Treaty (DTT) between Kazakhstan and Cyprus was ratified on January 17th, 2020. The DTT Convention on income tax will enter into full force from 1st January 2021 and the main amendments of the Convention cover the taxation of dividends, interest, capital gains and royalties. These provisions aim to create unique opportunities for both countries’ businesses and entrepreneurs in the long-term.

DTT Withholding Tax Rates: The double taxation treaty provides the possibility of lowering the withholding income tax rates on:

Dividends:

• 5% – if the company directly owns at least 10% of the capital dividend payer, or

• 15% – in all other cases.

• 5% – Net income of a Permanent Establishment (PE) – 5%.

• 10% – Interest

• 10% – Royalty

• Permanent Establishment

The Permanent Establishment (PE), includes both construction activities lasting for a period of more than 6 months within a year, as well as the provision of services for a period of time aggregating more than 183 days in one year.

Corporate income tax (CIT): Foreign legal entities are taxed only on income derived from sources in Kazakhstan or income derived through activity performed by a Permanent Establishment in Kazakhstan.

Capital gains: Under the DTT agreement, gains derived by a resident of one state from the alienation of shares or comparable interests in the capital of a company 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. Per Cypriot legislation, there is no withholding tax on dividends paid if the parent company holds at least 1% of the shares of its subsidiary with any limitation of holding period required. Gains obtained from the disposal of any property outside Cyprus are exempted.

Exchange of information (EOI): The Convention includes general regulations based on the OECD Model regarding the exchange of information. The authorized bodies of Kazakhstan and Cyprus are entitled to exchange information necessary for the implementation of the provisions of the Convention.

Offshore activities: Article 21 of the Treaty specifies that any enterprise of a contracting state that carries out offshore activities in the other contracting state will be deemed to have a permanent establishment in the other state. This does not apply if such activities cover an aggregate of 30 days or less in any 12 months beginning or ending in the fiscal year concerned.