On 15 May 2019, the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Convention) was signed, in Nursultan, between the Government of Cyprus and the Government of Kazakhstan. Later, on 24 May 2019, Cyprus ratified the relevant double tax treaty it had signed with Kazakhstan (the DTT).
The Convention is based on the new OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital (OECD Model Convention) and is expected to further contribute to the development of trade and economic relations between Cyprus and Kazakhstan, while bringing new opportunities and better protection for taxpayers in both countries. Kazakhstan is located in the heart of Eurasia and is a bridge between the East and West, therefore, this will further encourage investment from/to Europe and America through Cyprus. The Convention is also expected to regulate the exchange of banking and other information in line with Article 26 of the OECD Model Convention.
Below is a summary of the withholding taxes, as set out in the DTT:
- Dividends – maximum five per cent withholding tax (WHT) on dividend payments where the recipient is a company that directly holds at least 10 per cent of the capital of the paying company, otherwise, the DTT provides for a maximum 15 per cent WHT rate on dividends. No WHT applies on dividend payments to non-Cyprus residents.
- Interest – maximum 10 per cent WHT on interest payments, however, with regards to certain interest payments to the Government there is a zero per cent WHT rate on interest payments to non-Cyprus tax residents.
- Capital gains – Cyprus retains the exclusive taxing rights on disposals of shares made by Cyprus tax residents, except in the following cases:
- where non-listed shares derive more than 50 per cent of their value, directly or indirectly, from immovable property situated in Kazakhstan; and
- where shares derive the greater part of their value from certain offshore rights and/or movable property relating to exploration or exploitation of the seabed or subsoil or their natural resources located in Kazakhstan.
This is the 65th agreement Cyprus has signed on the avoidance of double taxation. Growing Cyprus’ network of double taxation conventions is of high economic and political importance and aims to further strengthen Cyprus as an international business centre.
If you have questions, please contact Emily Yiolitis, Marisa Efstathiou Petevi or your usual Harneys contact.