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Cyprus-Switzerland Double Tax Treaty

Cyprus-Switzerland Double Tax Treaty

7 March 2016 Tax Law

On July 25th 2014, Cyprus and Switzerland signed the first ever Double Tax Treaty (DTT) between the two countries. The treaty has entered into force on October 15th 2015 and has come to effect as of January 1st 2016.

The said treaty, based on the OECD (Organization for Economic Cooperation and Development) Model Convention for the Avoidance of Double Taxation on Income and on Capital, will contribute to the development of Cyprus’ trade and economic relations with the Swiss confederation and is a useful tool for attracting inbound and structuring outbound investments to and from Cyprus.

Under the Treaty, there is no withholding tax (WHT) on interest and royalties.

The following withholding tax rates apply on dividends:

  • 0% if the beneficial owner of the dividend is:
    (i) A company (the term does not include partnerships) whose capital is wholly or partly divided into shares holding directly at least 10% of the capital of the company paying the dividend for an uninterrupted period of at least one year , or
    (ii) A pension fund or other similar institution recognized as such for tax purposes, or
    (iii) A Government, a political subdivision, local authority or central bank of one of the two contracting states.
  • in all other cases 15% apply.
  • Interest: Nil withholding tax.
  • Royalties: Nil withholding tax.

Under the Treaty, Cyprus retains the exclusive taxing right on disposals of shares in Swiss companies, except in certain cases, in which the disposed-of shares derive more than 50% of their value directly or indirectly from immovable property situated in Switzerland.