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New Double Tax Treaty with United Kingdom

New Double Tax Treaty with United Kingdom

27 August 2018 Tax Law

On the 22nd of March 2018, Cyprus and the United Kingdom has signed in Nicosia the new Double Tax Treaty which will become effective as from 1st of January 2019. The new Double Taxation Treaty replaces the treaty signed between the two countries in 1974.

In case of Cyprus the new Treaty applies to taxes withhold at source for amounts paid or credited on or after 1st of January 2019 and other taxes and it covers the corporate and personal income tax, the special contribution for defense tax and capital gains tax.

In the case of UK, the treaty covers taxes withheld at source for amounts paid or credited on or after 1st of January 2019, Income tax and Capital Gains Tax any year of assessment beginning on or after 6th of April 2019 and to Corporate Tax for any financial year beginning on or after 1st of April 2019.

The Treaty provides for zero withholding taxes on dividends in case the recipient is the beneficial owner of the income, except where dividends are paid out of income, derived directly or indirectly from immovable property by an investment vehicle which distributes most of this income annually and whose income from tax in which case a withholding tax 15% applies.

There is no withholding tax on interest and royalty payments as ln as the recipient is the beneficial owner of the income.

The provisions of Article 27 regarding the Mutual Agreement Procedure and Article 26 for Exchange of Information, shall have effect in both Countries as from 18th of July 2018, without regard to the taxable year or chargeable period to which the mater relates.