Cyprus and Iceland have signed a double taxation agreement based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital, the Finance Ministry said in a statement on Friday. By signing this agreement both countries aim to strengthen their trade and economic relations. “Updating, maintaining existing and signing new double taxation treaties is part of the drive to enhance and attract foreign investments, as well as of promoting Cyprus as an international business hub,” the statement also said. Cyprus has double taxation treaties with more than 50 countries.

The rates of withholding tax on dividends, interest and royalties are as follows:

On dividends:

  • 5% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends:
  • 10% of the gross amount of the dividends in all other cases.

On interest:

  • Nil

On royalties:

  • 5% of the gross amount of the royalty

Under the treaty Cyprus retains the exclusive taxing right on disposals of shares in Icelandic companies except in the following cases:

  • when the disposed-of shares derive than 50% of their value directly or indirectly from immovable property situated in Iceland, or,
  • the disposal of shares is made by an individual who was a resident of Iceland in the course of the last five years preceding the disposal.