Cyprus: Income tax treaty with the Netherlands

First tax treaty between the two countries

First tax treaty between the two countries

Representatives of the governments of Cyprus and the Netherlands on 1 June 2021 sign an income tax treaty—the first tax treaty between the two countries.

The income tax treaty between Cyprus and the Netherlands generally follows the provisions of the OECD Model Tax Treaty and aims to eliminate double taxation with respect to taxes on income and the prevention of tax evasion and avoidance. The treaty will enter into force after both countries complete their respective ratification processes, and the treaty provisions will be effective in the year following the year during which the ratification processes are completed.

The Cyprus-Netherlands income tax treaty includes the following withholding tax rates:

  • Dividends
    • 15%
    • Exempt if the dividends are received by a recipient holding at least 5% of the capital of the company paying the dividends throughout a 365-day period that includes the day of distribution of the dividend, and the recipient is a recognized pension fund of the other country
  • Interest—No withholding tax, provided that the recipient is the beneficial owner of the income
  • Royalties—No withholding tax on payments of royalties, provided that the recipient is the beneficial owner of the income
  • Capital Gains—Gains derived by a resident of one of the treaty countries from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other country may be taxed in that other country

The treaty also includes a “Limitation of Benefits” article.

Read a June 2021 report prepared by the KPMG member firm in Cyprus


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