The new Double tax treaty between Cyprus and Ukraine was signed
The treaty that was signed on November 8, 2012 will enter into effect on 1 January following the year of ratification by both countries and this is expected to be January 2014.
- The definition of a permanent establishment now follows the OECD model treaty wording. Specifically, a building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it exceeds a period of 12 months.
- In relation to dividend income, the withholding tax rate will be 5 % subject to the beneficial owner holding at least 20 % of the capital of the dividend paying company or has invested at least € 100.000 in the share capital or other rights of the dividend paying company. In any other case, the rate of tax is 15 %.
- In relation to interest income, the withholding tax rate is 2 %.
- In relation to royalties, the withholding tax rate is 5 % on any royalties arising from the use of any copyright of scientific work, trade mark, patent, secret formula, process or information concerning industrial, commercial or scientific experience. For all other cases the withholding tax rate is 10 %.
- In relation to capital gains tax, the taxing rights in respect to a disposal of shares (irrespective of the underlying assets of the company in which the shares are being disposed of) or other movable property is granted to the State in which the person making thedisposal is tax resident.
It is important to note that although there is a small increase in withholding tax rates, the uncertainty that existed is now eliminated and accurate tax planning may take place.
English version of the text of the new DTT (as provided by our Cyprus colleagues WTS World Tax Service Cyprus Ltd) is available here.
The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.