New Cyprus-Iran Double Tax Treaty & Benefits

tax-468440_640Cyprus and Iran approved a new Double Tax Treaty in August 2015. Due to the friendly tax regime and wide Double Tax Treaties network, Cyprus is viewed as the ideal jurisdiction to conduct business and invest in as well as out of Iran.

Outline of Cyprus Tax Regime

  • Cyprus’ Double Tax Treaty network is extensive.
  • Resident companies are subject to 12.5% tax on profits, making Cyprus an ideal jurisdiction for trading.
  • Cyprus does not impose tax on dividends, and exempts withholding taxation on dividends that are paid to non-Cyprus shareholders. The aforementioned attract holding companies to Cyprus.
  • Any profits received from assets located abroad are not taxed in Cyprus, providing that not more than 50% of the income was generated from investment income.
  • Cyprus does not impose Capital Gains Tax, with the exemption of Cyprus-based immovable property or shares of companies that own immovable property.
  • There are no CFC regulations.
  • There are no thin capitalisation rules.
  • Deemed interest reductions are permitted on new equity funds that have been implemented in a Cyprus-based tax resident corporation as long as the funds are utilised in the company’s operations.

Cyprus & Iran Double Tax Treaty

  • Permanent Establishment

In accordance to the OECD Model Tax Convection, a company that has a presence abroad for more than a year will develop a permanent establishment.

  • Dividends

In cases where the beneficial owner directly owns 25% or more of the capital of the dividend paying company, he is subject to 5% withholding tax. In all other situations the withholding tax imposed is 10%.

  • Interest & Royalties

Withholding tax on interest and royalties is 5% and 6% respectively.

  • Capital Gains

Any gains acquired by a resident in one jurisdiction from the disposal of immovable assets in the other country are subject to tax in the country the immovable property was disposed.

Furthermore, any gains acquired by a resident in one jurisdiction from the disposal of a company’s shares, that more than 50% of their value is attributed to immovable property located in the other jurisdiction is also subject to tax in the country where the immovable property is located.

  • Limitations of Benefits

The Cyprus – Iran double tax treaty does not include a limitation of benefits clause.

  • Dividends, Interest & Royalties Paid from Cyprus

No withholding tax on dividends, royalties or interest paid from Cyprus.