Cyprus – Lebanese Republic Double Tax Treaty

The government of the Republic of Cyprus and the Government of the Lebanese Republic, have signed an agreement on 18^th of February 2003, effective as from 14^th of April 2005, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

 

Taxes Covered

In case of Cyprus – ‘’Cyprus Tax’’

1. The income tax
2. The corporation tax
3. The defence tax
4. The immovable property tax
5. The capital gains tax

In case of Lebanon – ‘’Lebanese Tax’’

1. The tax on profits of industrial, commercial and non-commercial professions
2. The tax on salaries and pension
3. The tax from movable capital
4. The tax on property

Resident (Article 4)

Resident of a contracting state means any person who, under the law of that state, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.

If an individual is a resident of both contracting states then his status shall be determined by his permanent home or where his personal and economic relations are closer or the habitual abode or where he is a national or by mutual agreement.

Where a person other than individual is a resident of both contracting states, then it shall be deemed to be a resident of the contracting state in which its place of effective management is situated.

Permanent Establishment (Article 5)

The term ‘’permanent establishment’’ means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

The term “permanent establishment” includes specifically:

1. place of management;
2. branch;
3. office;
4. factory;
5. workshop;
6. mine, oil or gas well, quarry, or any other place for extracting natural resources.
7. a building or construction site that exists for more than 9 months.
8. services of an enterprise of one state through personnel in the other state for the same project for more than 9 months.

Main sources of Income

 

Immovable Property Tax (Article 6)

Income from immovable property may be taxed in the State in which such property is situated.

Applies to income derived from the direct use, letting, or use in any other form of immovable property.

Applies to income from immovable property of an enterprise.

 

Business Profits (Article 7)

The profits of an enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on business in that other contracting state through a permanent establishment situated therein.

If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxes in the other state but only so much of them as is attributable to that permanent establishment.

 

Shipping and Air Transport (Article 8)

Profits from shipping and aircraft operations in international traffic are taxable in the state where the effective management of the enterprise is situated.

 

Dividends (Article 10)

Dividends paid by a company which is a resident of a contracting state to a resident of the other contracting state may taxed in that other state.

However, such dividends may also be taxed in the state of which the company paying the dividends is a resident and according to the laws of that state at a rate not exceeding 5% on gross amount.

 

Interest (Article 11)

Interest paid by a company which is a resident of a contracting state to a resident of the other contracting state may taxed in that other state.

Interest arising in a contracting state and paid to a resident of the other contracting state may be taxed in the contracting state in which it arises and according to the laws of that state at a rate not exceeding 5% on gross amount.

 

Royalties (Article 12)

Royalties arising in a contracting state and paid to a resident of the other contracting state shall be taxable only in that other state.

 

Director fees (Article 15)

Director fees and other similar payments derived by a resident of a contracting state in his capacity as a member of the board of directors of a company which is a resident of the other contracting state may be taxed in that other state.

 

Artistes and Sportsmen (Article 16)

Income derived by public entertainers from their personal activities as such may be taxed in the contacting State in which these activities are exercised.

 

Elimination of Double Taxation (Article 22)

Where a resident of a contracting state derives income which, may be taxed in the other contracting state, the first mentioned state shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in that other state.  Such a deduction shall not, however, exceed that part of the income tax as computed before the deduction is given, which is attributable to the income which may be taxed in that other state.

 

Mutual Agreement Procedure (Article 24)

Where a person considers that the actions of one or both of the contracting states result or will result for him in taxation not with the provisions of this convention, he may, irrespective of the remedies provided by the domestic law of those states, present his case to the competent authority the contracting state which he is a resident.

 

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written by Alexandros Constantinou, Head of Tax Dept.