The Cyprus Government ratified the agreement between Cyprus and Estonia in February 2013, which is the first double tax treaty ever concluded between the two countries. The agreement is supposed to enter into force on 1 January 2014 as soon as the final steps of the process will be completed.

The agreement follows the latest Organisation for Economic Cooperation and Development (OECD) Model Treaty.

The main provisions are as follows:

Dividends, Interest and Royalties

Dividends, interest and royalties paid by a company that is a resident of one country to a resident of the other will be taxable only in the latter country.

Capital Gains

Capital gains derived by a resident of one country may be taxed in the country in which the property concerned is located where it relates to:

  • The disposal of immovable property situated in the other country
  • The disposal of shares deriving more than 50% of their value from immovable property situated in the other country
  • Movable property forming part of the business property of a permanent establishment which an enterprise of one country has in the other.

Exchange of information

The agreement permits the use of information received by a contracting state for purpose beyond the assessment of tax, where this is being legal under the laws of both states.

  • The identity of the person under examination
  • Details of the information requested and the form and manner in which the requesting state wishes to receive it.
  • The tax purpose for requesting the information
  • The reason for believing that the requested information is held by the tax authorities to whom the request is addressed, or is in the possession or under the control of a person within the jurisdiction.
  • The name and address of any person who may hold the information requested.
  • A declaration that the provision of such information is in accordance with the legislation and the administrative practices of the requesting state.
  • Proof that the requesting state has exhausted all practical means available in its own territory to obtain the information.

The new agreement provides an opportunity to increase business and investment between the two countries.