Cyprus – Double Tax Treaty signed with Luxembourg & Barbados

GRAND DUCHY OF LUXEMBOURG
The Double Taxation Avoidance Agreement between the Republic of Cyprus and the Grand Duchy of Luxembourg was signed on 8th of May 2017 in Nicosia.

Assuming the ratification process is completed before the end of 2017, the treaty is expected to enter into force and come into effect as from the 1st of January 2018.
The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Luxembourg, the treaty covers the income tax, the corporation tax, the capital tax and the communal trade tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications and bears the following main provisions:

Dividends:
• 0% in case where there is at least 10% participation by a tax resident company
• 5% in all other cases

Interest: There is no withholding tax on interest.

Royalties: There is no withholding tax on royalties, as long as the recipient of the royalties is the beneficial owner of the income.

Capital gains: Gains from the sale of shares of immovable property rich companies are taxed in the country where the immovable property is located.

BARBADOS
The Double Taxation Avoidance Agreement between the Republic of Cyprus and Banbados was signed on 03rd of May 2017 in London.

Assuming the ratification process is completed by both countries before the end of 2017, the treaty is expected to enter into force and come into effect as from 1st January 2018.

The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Barbados, the treaty covers the income tax and corporation tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications and bears the following main provisions:

There is no withholding tax on dividends, interest and royalty payments.
Capital gains arising from the sale of shares of a company are taxable only in the state where the seller is tax resident. This provision also covers the tax treatment of sales relating to shares of immovable property-rich companies.