The double tax agreement between Cyprus and Iran, which was signed on August 4 2015, entered into force on March 5 2017 following completion of all of the requisite ratification procedures. It took effect with regard to taxes withheld at source in Iran in respect of amounts paid or credited on or after March 21 2017 (the first day of the Iranian year 1396) and for other taxes in Iran in respect of tax years beginning on or after that date. It will take effect in Cyprus for withholding taxes paid or credited on or after January 1 2018 and for other taxes in respect of tax years beginning on or after that date (for further details please see "Details of double tax agreement between Cyprus and Iran").
The new agreement, which closely follows the Organisation for Economic Cooperation and Development Model Tax Convention, applies to taxes on income and gains from alienation of movable or immovable property. It limits withholding taxes on dividends to 5% of the gross dividend if the recipient is a resident of the other contracting state and the beneficial owner of the dividends, as long as it holds 25% or more of the share capital of the company paying the dividends. Otherwise, withholding tax is limited to 10%. Withholding tax on interest is limited to 5% and 6% on royalty payments as long as the recipient is the beneficial owner of the income. Cyprus does not levy any withholding taxes on dividend or interest. Gains from the sale of shares of immovable property-rich companies are taxed in the country where the immovable property is located.
Given Cyprus's geographical proximity to Iran, the Cyprus government hopes that the double tax agreement will help to establish Cyprus as the principal portal for investment between Iran and the European Union. The government is committed to building a long-term and mutually beneficial economic partnership with Iran and will continue engaging with the EU and US authorities to ensure that there are no unjustified obstacles to the resumption of economic and trade relations with Iran.
For further information on this topic please contact Philippos Aristotelous at Elias Neocleous & Co LLC by telephone (+357 25 110 110) or email ([email protected]). The Elias Neocleous & Co LLC website can be accessed at www.neo.law.