Convention between the Republic of Cyprus and the Netherlands for the Avoidance of double taxation

The Republic of Cyprus and The Netherlands, within the scope of developing further their economic relationship and enhancing their co-operation in tax matters, signed a double tax treaty with regards to income taxes and the prevention of tax evasion and tax avoidance on 1 June 2021.

The Treaty will be in effect in the year following the year in which the ratification process in both countries is completed.
The Treaty provides the following: -

• Dividends – No withholding tax (WHT) if the beneficial owner of the income is:
  • a company that holds directly at least 5% of the capital of the company paying the dividends throughout a 365-day period that includes the day of the payment of the dividend
  • a recognised pension fund which is generally exempt under the Corporate Income Tax Law in Cyprus

The applicable maximum WHT rate for all other cases is 15%.

• Interest – No WHT provided that the recipient is the beneficial owner of the income.
• Royalties - No WHT provided that the recipient is the beneficial owner of the income.
• Capital gains – gains from the sale of shares of companies are taxed in the Contracting State where the seller is located, except in the case of sale of shares of companies deriving more than 50% of their value from immovable properties located in the other Contracting State, where the tax is levied in that other State.

The treaty provides for certain exemptions.

The double tax treaty is based on the OECD Model Convention for the Elimination of Double Taxation on Income and on Capital and intends to the elimination of double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.

In this respect, the treaty provides for limitation of benefits under Article 26 “Entitlement to Benefits” by which the Tax Authorities are entitled to deny the application of treaty benefits if the obtainment of such benefit was one of the principal purposes (Principal Purpose Test) of the relevant arrangement/transaction, unless the granting of such benefit would be in accordance with the object and purpose of the treaty.

We are at your disposal in the event of further information is required.

Contact:

Tax Department
tax@kinanis.com