Wednesday, 10 April 2019 10:27

Cyprus Double Taxation Avoidance Agreement (DTAA) with Saudi Arabia is effective – March 2019

Cyprus and Saudi Arabia have concluded and signed a Double Taxation Avoidance Agreement (DTTA). The treaty was confirmed and finalized in 2018 and it is effective from the 1st of March 2019. The principles of the treaty in relation to withholding taxes, amounts paid or credited and other taxes of any tax year are applicable from the 1st of January 2020.

The treaty is based on the OECD Model Tax Convention framework with some modifications. Regarding Saudi Arabia, the treaty covers the Zakat (religious obligation of Muslims) and the income tax (including the natural gas investment tax) and for Cyprus, it covers corporate and personal income tax, defence tax and capital gains tax.

Dividends
The withholding tax rate on dividends is set at 0%, as long as there is at least 25% participation by a tax resident company. In any other case the withholding tax rate on dividends is set at 5%.

Interest
The withholding tax rate on interest is set at 0%, as long as the recipient of the interest is the beneficial owner of the income.

Royalties
The withholding tax rate on royalties is set at 5% in relation to royalties paid for the right to use industrial, commercial or scientific equipment. For any other royalties the withholding tax rate is set at 8%, as long as the recipient of the royalties is the beneficial owner of the income.

Capital gains
Gains from the sale of shares in companies are taxed in the country where the company is located, as long as the participation is at least 25%.