A new treaty aimed at preventing double taxation between Cyprus and France was signed on December 11, 2023, and announced in the Official Gazette on December 22, 2023. This treaty supersedes the one established in 1981 and will become effective after the ratification instruments are exchanged. The implementation of its terms will start from January 1 of the year following its activation.
The need for this revised treaty arose to align with the most recent international tax regulations and to foster better economic relations between Cyprus and France. It is grounded in the latest version of the OECD Model Convention for preventing double taxation and incorporates up-to-date standards regarding information exchange, mutual agreement procedures, arbitration, and the principal purpose test. It also fully considers the recommendations from the BEPS action plan.
The key elements of the treaty include:
- Dividends: A 0% withholding tax applies if the beneficial owner of the dividends is a company that directly holds at least 5% of the company's capital paying the dividends over a 365-day period including the payment day. In other scenarios, the withholding tax is 10%.
- Interest: A 0% withholding tax is applicable.
- Royalties: A 5% withholding tax is imposed.
- Capital gains: Residents of a Contracting State who gain from the sale of shares (or similar interests) in companies primarily based in real estate may be taxed in the other Contracting State. This applies if, at any time in the 365 days before the sale, such shares (or interests) derive over 50% of their value directly or indirectly from immovable property located in that other 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.
