Double Tax Treaty signed between Cyprus and Kazakhstan

A new Double Tax Treaty was signed on 15 May 2019 between Cyprus and Kazakhstan. The Treaty, which was published in the Gazette on 24 May 2019, will enter into force as soon as the ratification process is completed by both countries, and its provisions are expected to be applicable on 1 January of the following year.

The Treaty is based on the OECD Model Convention and thus incorporates the latest international standards with regards to exchange of information, mutual agreement procedure, and as well as a principal purpose test.

This new Treaty is expected to enhance the commercial and economic relationships between the two countries and to provide opportunities for further cooperation.

The main provisions of the Treaty are as follows:

• Dividend income: Withholding tax of 5% if the beneficial owner of the dividends is a company (other than a partnership) holding directly at least 10% of the capital of the dividend-paying company. In all other cases, tax is withheld at 15%.
• Interest income: Withholding tax of 10% if the recipient of the interest income is the beneficial owner of such income.
• Royalties: Withholding tax of 10% if the recipient of the royalties is the beneficial owner of such income.

NOTE: As per the local Cyprus legislation, Cyprus does not withhold tax on outbound dividends or interest payments, and only withholds tax on royalty payments (10%) if the royalties are used within Cyprus.

• Capital gains: Gains from the disposal of shares in property-rich companies, deriving more than 50% of their value (either directly or indirectly) from immovable property, may be taxed in the country in which the immovable property is situated, with the exception of disposal of shares in companies listed on an approved stock exchange.