International Tax

Cyprus and France Signs a New Double Tax Treaty and its Protocol with Respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance

On December 11, 2023, the Ministry of Finance of Cyprus announced the signing of a new double tax treaty and its protocol with respect to taxes on income and the prevention of tax evasion and avoidance between Cyprus and the French Republic.

The new treaty, once it is ratified by both countries, will replace the old treaty of 1981 between the two countries.

The new treaty is based on the OECD Model Tax Convention on Income (2017 Model) and incorporates all the minimum standards of the Base Erosion Profit Shifting (BEPS) project, as issued by the OECD /G20.

Accordingly, the withholding taxes on;

Dividends:

  • dividends paid by a company which is a resident of a Contracting State may also be taxed in that State according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed 15% of the gross amount of the dividends.
  • dividends paid by a company which is a resident of a Contracting State shall be taxable only in the other Contracting State if the beneficial owner of the dividends is a company which is a resident of that other Contracting State and which holds directly at least 5% of the capital of the company paying the dividends throughout a 365 days period that includes the day of the payment of the dividends (for the purpose of computing that period, no account shall be taken of changes of ownership that would directly result from a corporate reorganisation, such as a merger or divisive reorganisation, of the company that holds the shares or that pays dividends).

Interests:

Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in that other State.

Royalties:

Royalties arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

However, such royalties may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 5% of the gross amount of the royalties.

The new agreement is expected to further enhance trade and economic ties between the two countries, safeguarding fairness and equitability.

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