An updated treaty for avoidance of double taxation (the “Treaty”) between Cyprus and France was signed on 11 December 2023 and was published in the Official Gazette on 22 December 2023, replacing the previous Treaty that dated back to 1981. It will enter into force once the ratification instruments are exchanged and its provisions will enter into effect from 1 January of the year following its entry into force.
The revised Treaty was deemed necessary in order to be aligned with the latest international rules and developments on taxation, and to further enhance the conditions for economic collaboration between the two countries. It is based on the latest version of the OECD Model Convention for the avoidance of double taxation, incorporates the latest standards with regards to the exchange of information, mutual agreement procedure, arbitration, principal purpose test, and takes into full consideration the recommendations of the BEPS action plan.
The main provisions of the Treaty are as follows:
- Dividends: 0% withholding tax if the beneficial owner of the dividend is a company holding directly at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the payment, and 15% in all other cases.
- Interest: 0% withholding tax
- Royalties: 5% withholding tax
- Capital gains derived by a resident of a Contracting State from the alienation of shares (or comparable interests) in property-rich companies may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, such shares (or comparable interests) derive more than 50% of their value directly or indirectly from immovable property situated in that other State.