Recently, a meeting took place in Nicosia between the Minister of Finance of Cyprus, Makis Keravnos, and the Ambassador of the Netherlands to Cyprus, Elke Merks-Schaapveld.
The representatives of the two countries finalized the Agreement for the Avoidance of Double Taxation.
Keravnos expressed satisfaction with the conclusion of the lengthy negotiations. It is expected that the Agreement will come into effect on June 30, 2023.
Cyprus was the last member of the European Economic Area with which the Netherlands had not yet concluded an Agreement for the Avoidance of Double Taxation. The purpose of the agreement between Cyprus and the Netherlands is to further strengthen cross-border cooperation and promote cross-border investments. The formulation of the agreement as a whole corresponds to the model agreement of the Organisation for Economic Co-operation and Development (OECD) and contains standard provisions to avoid double taxation of income and capital.
In order to implement measures to reduce base erosion and profit shifting (BEPS) related to dispute resolution and tax avoidance, the agreement includes a mutual agreement procedure (MAP) for dispute resolution (including double tax residency of legal entities) and introduces a principal purpose test (PPT).
This criterion allows tax authorities to deny the application of treaty benefits if the application of these benefits was one of the main purposes of the agreement or transaction.
The tax agreement also provides for full exemption from withholding tax on dividend payments to corporate investors, provided that they directly own at least 5% of the capital of the dividend-paying company for a period of 365 days. This exemption also applies to certain recognized pension funds, which are generally exempt from taxation in accordance with the corporate tax legislation of the participating countries. The tax agreement between Cyprus and the Netherlands, combined with a 0% withholding tax rate for interest and royalties, represents a favorable legal basis for cross-border investments.
Are you interested in real estate on the island? Visit the number one real estate agency in Cyprus, DOM! The agency's website features the largest database of properties in the country, with over 30,000 residential and commercial properties throughout the island. Choose and consult with professional brokers who will assist you in making the right choice!