July 2013,

The new treaty between Cyprus and Ukraine will replace the Cyprus – Former USSR Treaty of 1982. The new treaty will come into force in January 2014.

 

The treaty’s most important provisions are as follows:

Dividend Income

Withholding tax rate will be 5% with the beneficial owner holding at least 20% of the capital of the dividend paying company or invested at least €100.000 in the share capital or other rights of the dividend paying company.

Interest Income

Profits received by interest payments shall bear a withholding tax rate of 2%.

Royalty Income

The withholding tax rate will be 5% on royalties from the use of any copyright of scientific work, trade mark, patent, secret formula or information concerns industrial, commercial or scientific experience. For all other cases the withholding tax rate will be 10%.

Capital Gains

Movable property is granted to the State in which the person making the disposal is tax resident.  The tax obligation is zero and the real estate holding groups will still benefit as with the current DTT.

Permanent Establishment

A construction site, a building site or any supervisory activities in connection with such sites constitute a permanent establishment only if it exceeds a period of 12 months.

Eliminating Double Taxation

Double taxation elimination is achieved through Article 12 of the new DTT which adopts the credit method of eliminating double taxation on income.

The new double taxation treaty will encourage new business into Cyprus, therefore vanishes any doubt which existed in the old DTT.

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