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Double-Taxation Avoidance Agreement for Cyprus and the Netherlands

Fidinam & Partners

On June 1st, 2021 the Republic of Cyprus and the Kingdom of the Netherlands signed their first-ever agreement to avoid the double taxation (DTAA), drafted according to the OECD model.

Here below a brief review of Articles 10, 11, 12, and 13 of the agreement:

The agreement provides for a maximum 15% withholding tax on dividends paid, such rate could be reduced to 0% for the following cases:

- The beneficiary of the dividends is a company that holds directly at least 5% of the share capital of the company that is paying the dividend, for a period of at least 1 year; or
- The beneficiary of the dividends is an authorized retirement or pension fund.

There is no withholding tax on interest paid if the receiver of the payment is the actual beneficial owner of the interest.

There is no withholding tax on royalties paid if the receiver of the payment is the actual beneficial owner of the royalties.

Gains deriving from the sale of movable properties are taxable in the country of residence of the seller. While in case of sale of immovable properties, or shares of a company where at least 50% of the value is constituted directly or indirectly by immovable properties, the capital gain will be taxable in the country where these properties/companies are located.

The agreement contains an anti-abuse clause based on guidelines of the BEPS project (Base Erosion and Profit Shifting) which prevents from using the agreement for avoiding the fiscal obligations.

The DTAA will be effective as of the 1st January of the year following the formal entry into force.

This agreement is considered quite relevant.
Signing the agreement both contracting states marked the significance, even for small countries, of reaching a competitive market where investment decisions are allocated on the grounds of real economic incentives and not biased by achievable fiscal arbitrage.

This article is edited by Fidinam & Partners International Tax Competence Centre; to stay up-to-date on all international tax news, please fill in the Form below.

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