New Double Tax Treaty between Cyprus and Luxembourg

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A Double Tax Treaty between Cyprus and Luxembourg was signed on 8 May 2017. The Treaty will enter into force once the ratification process is completed, and its provisions will be applicable on 1 January of the following year.

The Treaty is based on the OECD Model Convention. It incorporates the latest international standards with regards to the exchange of information, and it takes into account recommendations of the BEPS Action Plan.

The Treaty provides for withholding tax at the following rates:

  • Dividends: No withholding tax if the beneficial owner of the dividend is a company holding at least 10% of the capital of the dividend-paying company, and 5% in all other cases
  • Interest: No withholding tax
  • Royalties: No withholding tax if the recipient of the royalties is the beneficial owner of the income

Gains from the sale of shares in property-rich entities, deriving more than 50% of their value directly from immovable property, shall be subject to tax in the country in which the property is situated.

As per the terms of the Treaty, collective investment schemes established in either country will be considered as tax residents of that country, and will thus be entitled to claim the benefits of the Treaty.

The Treaty is expected to pave the way for further expansion of the two countries’ economic and commercial relationships, while at the same time strengthening their cooperation in tax matters.

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