Updates on Cyprus DTTs with Saudi Arabia & Ethiopia

Cyprus & Saudi Arabia Double Tax Treaty (DTT)

Cyprus and Saudi Arabia signed a DTT on the 3rd of January 2018. The DTT that was signed amongst the two countries will be implemented on the 1st of January 2019, after all legalities are completed.

DIVIDENDS

0% Withholding Tax on Dividend Distributions

According to the relevant DTT, dividends will not be subject to withholding tax when the beneficial owner is a company that directly or indirectly holds 25% or more of the capital in the paying company. The aforementioned regulation does not include partnerships. In all other situations, dividends will be subject to 5% withholding tax.

INTEREST

0% Withholding Tax on Interest

Interest will not be subject to withholding tax provided that the interest receiver is also the beneficial owner of the income.

ROYALTIES

5% Withholding Tax on Royalty

The DTT states that in cases where the receiver of royalties is also beneficial owner of royalties, royalties will be subject to withholding tax as follows:

  • 5% withholding tax will be imposed on the gross amount of royalties to pay for the use of commercial, industrial or scientific equipment;
  • And in all other cases 8% withholding tax will be imposed on the gross amount of royalties.

CAPITAL GAINS TAX

Finally, any capital gains made from disposing shares of a substantial participation in a company which is a resident of a Contracting State such gains will be subject to tax in that Contracting State.

An individual is regarded as having substantial participation when it holds 25% or more capital in the target company at any time within a year prior to the disposal of the shares.

Cyprus & Ethiopia Double Tax Treaty (DTT)

Cyprus and Ethiopia signed a DTT in December 2015. The DTT came into effect on the 18th of October 2017. However, based on the DTT’s provisions, the DTT will be implemented in Cyprus on the 1st of January 2018 while in Ethiopia it will be implemented on the 8th of July 2018.

According to the DTT, dividend, royalty and interest payments are subject to 5% withholding tax.

No withholding tax will be imposed on interest when the beneficial owner is the government, local authority, political subdivision or the national bank of the receiving state.
Cyprus has the right to tax capital gains when disposing shares in Ethiopian companies and also reserves the right to tax such disposals of shares even in cases where the Ethiopian company owns immovable property located in Ethiopia.

The aforementioned DTTs have further extended the Cyprus DTT network. The aim is to increase investment opportunities as well as promote trade relations amongst the countries.

For further information and professional assistance you may contact us at solutions@oxfordcy.com .