Cyprus has concluded a number of tax treaties with other countries. These agreements apply to offshore entities in the same way as they apply to other business entities except that certain agreements exclude offshore entities from the provisions of certain articles.

THE EXCLUSIONS ARE SUMMARISED BELOW:
  • CANADA: Article 29 provides that the convention does not apply to offshore entities.
  • FEDERAL REPUBLIC OF GERMANY: the protocol to the treaty reduces the full tax exemption in Germany of certain items of income and capital in the case of offshore entities, to a simple tax credit. The items of income affected are profits and capital gains of a Cyprus offshore branch as well as dividends and capital gains on immovable property and shares in the case of a Cyprus offshore company.
  • FRANCE: the articles on dividends, interest and royalties do not apply in the case of entities substantially controlled by non-residents if such entities pay tax at a rate substantially lower than normal.
  • UNITED KINGDOM: under the protocol to the agreement the dividends, interest and royalty articles do not apply to offshore entities
  • UNITED STATES: the treaty contains rules designed to prevent residents of third countries from establishing entities in a Contracting State for the purpose of deriving treaty benefited income from the other Contracting State. Such provisions also deny treaty benefits where the income is subject to tax in a Contracting State at a rate which is substantially lower than the rate generally applicable to income in that Contracting State.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.