Netherlands Double Tax Treaty

Cyprus signs Double Tax Treaty with Netherlands

A Double Tax Treaty was signed between Cyprus and Netherlands on 1^st June 2021, and was published in the Official Gazette on 4^th June 2021. The Treaty will enter into force once the ratification process is completed, and its provisions will be applicable on 1^st January of the following year.

The Treaty is based on the OECD Model Convention, and thus incorporates all the latest international standards with regards to the exchange of information, and it takes into account recommendations of the BEPS Action Plan.

The Treaty is expected to pave the way for further expansion of the two countries’ economic and commercial relationships, while at the same time strengthening their cooperation in tax matters.

The Treaty’s main provisions are as follows:

Dividends

No withholding tax if the beneficial owner of the dividend is:

• a company holding at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the dividend payment;
• a recognized pension fund which is generally exempt under the Cyprus Corporate Income Tax Law

For all other cases, the Treaty provides for withholding tax at the rate of 15%

Interest

No withholding tax, provided that the recipient of the interest is the beneficial owner of the income.

Royalties

No withholding tax, provided that the recipient of the royalties is the beneficial owner of the income.

Capital gains

Gains derived by a resident of one of the Treaty countries from the alienation of shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other country may be taxed in that other country.

Limitation of benefits

The Treaty contains a limitation of benefits clause in the form of a ‘principal purpose test’, whereby benefits under the Treaty shall not be granted in cases where it is reasonable to conclude that obtaining such benefits was one of the principal purposes of any arrangement or transaction.