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The evasion of double taxation between Cyprus and Kazakhstan and the inauguration of the ratified Double Tax Treaty (“DTT”)

The evasion of double taxation between Cyprus and Kazakhstan and the inauguration of the ratified Double Tax Treaty (“DTT”)

3 February 2020 Tax Law

Convention between Cyprus and Kazakhstan for the evasion of the double taxation led to the Double Tax Treaty (the ‘DTT’) being signed in Nur-sultan Kazakhstan, on the 15th of May 2019. Cyprus validates the DTT on the 24th of May 2019, and has become effective on the 17th of January 2020. Within this Treaty, Cyprus will indubitably further develop its trade relations and consequently introduce additional opportunities and prospects for investment. Also, an adequate defence and protection towards tax payers will be established. Lastly, having the Republic of Cyprus networking with the Republic of Kazakhstan that has the largest economy in Central Asia due to its natural resources, will irrefutably strengthen the Eurasian region.

To begin with, a maximum 5% of withholding tax on dividend payment is provided by DTT only if the beneficial owner is a business organisation (other than partnership) that pays dividends by embracing directly at least 10% of the capital. However, in all the other situations the tax is 15%.

Furthermore, regardless of the 5% or 15% of these withholding tax rates that are provided in the DTT, according to the Cyprus tax regulation, the withholding tax does not apply on dividend payments to Cyprus residents that are ‘non-dom’.

According to the interest, 10% of the withholding tax is provided on interest payments if the receiver is the beneficial owner of the income. Dissimilarly, if the owner is a governmental body or a local authority that is a 100% ruled or owned by the government therefore, there shall be a 0% withholding tax.

We note that when the receiver is the beneficial owner of such royalty, subsequently the DTT offers a 10% withholding tax on royalty payments (Cyprus withholding tax is not applicable to non-dom Cyprus residents’ royalty payments).

Capital Gains received by a resident of a Contracting State from the purchase or sale of immovable assets such as real estate that are situated in a state, they may be taxed in another state.

The aforementioned in regards to the DTT, expound the way in which this agreement was made for the evasion of the double taxation for capital and revenue purposes and how the withholding tax rates provide in dividend and interest payments, royalty and capital gains tax. This treaty will magnify the networking between Cyprus and other countries, hence boosting the ecopolitical activity of the island.