The new double tax agreement between Cyprus and Luxembourg was recently published on the Luxembourg tax administration's website. The agreement – the first such agreement to be signed by the two countries – closely follows the latest Organisation for Economic Cooperation and Development (OECD) Model Tax Convention for the Avoidance of Double Taxation on Income and on Capital. In line with the OECD Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting, it also includes:

  • a preamble clarifying that it is not designed to create opportunities for double non-taxation or reduced taxation through evasion or avoidance; and
  • a principal purpose test-based general anti-avoidance rule.

Under the agreement, the withholding tax on dividends is zero if the beneficial owner is a company that holds at least 10% of the share capital of the company paying the dividend, and is limited to 5% in other cases. In any event, Cyprus imposes no withholding tax on dividends paid to shareholders overseas. There are no withholding taxes on interest and royalties.

The agreement will enter into force once it has been ratified by both countries and its provisions will take effect from the beginning of the following calendar year.

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