Yiota Michael

Senior Associate - Tax Department

On 3 November 2021, the Protocol amending the Cyprus-Switzerland Double Tax Treaty (“DTT”) signed on 20 July 2020, has entered into force.

The Protocol does not amend the existing provisions in relation to withholding taxes on income and capital which remain unchanged from 2016. Instead, it introduces the minimum standards of the OECD base erosion and profit shifting actions. 

An overview of relevant amendments is indicated below:

I. Introduction of a preamble wording

The newly introduced preamble specifies that the DTT intention is to eliminate double taxation on income and on capital however, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (in line with BEPS Action 6).

II. Introduction of a Principal Purpose Test (“PPT”) through the Entitlement to Benefits Article of the DTT

A benefit under the DTT shall not be granted if the PPT is satisfied.  The PPT will apply to deny treaty benefits if, having regard to all relevant facts and circumstances, it is reasonable to conclude that obtaining the treaty benefit was one of the principal purposes of an arrangement or transaction that directly or indirectly resulted in that benefit. As an exception to this rule, if granting the benefit would be in accordance with the object and purpose of the relevant provisions (objective test), the treaty benefit will not be denied (in line with BEPS Action 6).

III. Mutual Agreement Procedure

For mutual agreement procedures, Article 26(1) has been replaced to provide parties with an opportunity to present their cases before the competent authority of either contracting state (irrespective of the remedies available) should the parties consider that the actions of one or both of the Contracting States result in taxation not in accordance with the provisions of the DTT (in line with BEPS Action 14).

 IV. Other important amendments

Another important amendment to the existing DTT is the introduction of a six years limitation period on adjustments made by competent Authorities in respect of profits attributed on transactions between associated enterprises and permanent establishments.

The amendments mentioned in points (i) and (ii) above shall have effect from 1 January 2022, while the amendments mentioned in points (iii) and (iv) above have effect from 3 November 2021 (date that the Protocol has entered into force).



This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.



Tax Department