Cyprus – United Kingdom Double Tax Treaty

The government of the Republic of Cyprus and the Government of the United Kingdom, have signed an agreement on 1^st of November 1974, effective as from 18th March 1975, 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

In case of United Kingdom – ‘’United Kingdom Tax’’

1. The Income tax
2. The corporation tax

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 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:

a) place of management;

b) branch;

c) office;

d) factory;

e) workshop;

f) mine, oil well, quarry, or any other place for extracting natural resources.

g) a building or construction site that exists for more than 6 months.

h) a farm or plantation.

i)  a place of extraction of timber or forest produce.

Main sources of Income

Immovable Property Tax (Article 7)

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 and to income from immovable property used for professional services.

Business Profits (Article 8)

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 10)

A resident of one contracting State shall be exempt from tax in the other State on profits from the operation of ships or aircraft in international traffic.

Dividends (Article 11)

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 15% on gross amount provided that the person receiving the dividends will be entitled of a tax credit in the country he is a resident.

Interest (Article 12)

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 10% on gross amount.

Royalties (Article 13)

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, royalties received in consideration for the use or right to use films and tapes for television may 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.

Director fees (Article 16)

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.

Public Entertainers and Athletes (Article 17)

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

Pension (Article 19)

Pensions and annuities received within one of the contracting States by a resident of the other Contracting State and subject to tax in the other State shall be exempt from tax in the first contracting State.

Teachers (Article 20)

An individual who, at the invitation of a university, college, school or other similar recognised educational institution in one of the Contracting States, visits that Contracting State for a period not exceeding two years solely for the purpose of teaching at such educational institution and who is, or was immediately before that visit, a resident of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State on any remuneration for such teaching in respect of which he is subject to tax in the other Contracting State.

Elimination of Double Taxation (Article 24)

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 27)

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.