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Cyprus – Saudi Arabia DTT Signed

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Cyprus and Saudi Arabia signed a Double Taxation Treaty (DTT) on January 03, 2018, which is expected to be ratified and come into force as from January 01, 2019.

The new treaty – which applies to taxes on income as well as on gains from the alienation of movable or immovable property - is based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention framework.

Some modifications have been made to the framework; the treaty covers the Zakat and income tax (including the natural gas investment tax) for Saudi Arabia, whereas it covers corporate and personal income tax, defence tax, and capital gains tax for Cyprus.

Under the treaty, there is no withholding tax on dividends in cases where there is at least 25% participation by a company that is tax resident in the receiving jurisdiction. For all other cases, withholding tax is 5%.

There is no withholding tax on interest, provided that the recipient of the interest is the beneficial owner of the income.

In regards to royalties, withholding tax is 5% in cases where the royalties are paid for the use of, or the right to use, industrial, commercial or scientific equipment. Withholding tax is 8% for all other cases.

In regards to capital gains, tax applies in the Contracting State for gains arising from the disposal of shares of a substantial participation in the capital of a company that is resident of that Contracting State. ‘Substantial participation’ is defined as participation of at least 25% of the capital of that company, at any time within 12 months prior to the disposal of the shares.