Cyprus – Romania Double Tax Treaty

The government of the Republic of Cyprus and the Government of the Socialist Republic of Romania, have signed an agreement on 16^th of November 1981, effective as from 8th November 1982, for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital.

Taxes Covered

In case of Cyprus – ‘’Cyprus Tax’’

1. The income tax
2. Special contribution for the defence
3. The capital gains tax

In case of Romania – ‘’Romanian Tax’’

1. Tax on profits of companies and individuals
2. Tax on profits of joint companies
3. Tax on income from agricultural activities

Resident (Article 4)

Resident of a contracting state means any person who, under the law of that state, is liable to tax 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 the centre of vital interests or the habitual abode or where he is a national.

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 12 months.

Main sources of Income

Immovable Property Tax (Article 6)

Income from immovable property (including income form agriculture or forestry) situated in the other contracting state may be taxed in that other state.

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

Ships, boats and aircraft are not regarded immovable property.

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.

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 10% on gross amount.

Interest (Article 11)

Interest arising in a contracting state and paid to a resident of the other contracting state shall be taxable in that other state if such resident is the beneficial owner of this interest.

However, such interest may also be taxed in the contracting state in which it arises and according to the laws of that state at a rate not exceeding 10% 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.

However, such royalties may also be taxed in the contracting state in which they arise, and in accordance with the laws of that state, at a rate not exceeding 5% on gross amount.

Commissions (Article 13)

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

However, such commissions may also be taxed in the contracting state in which they arise, and in accordance with the laws of that state, at a rate not exceeding 5% of the commission.

Capital Gains (Article 14)

Gains derived by a resident of a contracting state from the alienation of immovable property situated in the other contracting state may be taxed in that other state.

Gains from the alienation of ships or aircrafts operated in the international traffic by an enterprise of a contracting state shall be taxable only in that contracting state where the effective management of the company is.

Director fees (Article 17)

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.

Pension (Article 20)

Pensions, annuities and other similar remuneration received by a resident of a Contracting State shall be taxable only in that State.

Elimination of Double Taxation (Article 25)

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 28)

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.