On 17 December 2021 Cyprus and the Hashemite Kingdom of Jordan signed a Double Tax treaty for the avoidance of double taxation, published in the Official Gazette of the Republic on 31 December 2021.
The Double Tax treaty secures the standards of the Base Erosion Profit Shifting (BEPS) program and is based on the OECD Model Tax Convention.
Once all the pending administrative procedures between the two contracting states are completed, the treaty will enter into force and will have effect in both states in January 1rst 2022 or after January 1rst following the date the treaty enters into force.
The main provisions of the treaty are the following:
Limitation of entitlement to benefits under article 29 of the treaty whereby the Tax Authorities are entitled to deny the treaty benefits if the obtainment of such benefit was one of the principal purposes of the relevant arrangement, unless the granting of such benefit would be in accordance with the purpose of the treaty.
5% WHT (withholding tax) on Dividends if the beneficial owner is a company, other than a partnership, holds directly at least 10% of the capital of the company paying the dividends. In all other cases, a maximum 10% WHT applies.
5% WHT on interest payments, provided that the recipient is the beneficial owner of such interest, and no WHT for interest payments where the beneficial owner of the interest is a political subdivision, a local authority, the National Bank or the government of the other Contracting State.
7% WHT on royalties and fee payments for technical services, provided that the recipient is the beneficial owner of such royalties/fees.