Double Taxation Treaty Agreement between Cyprus and Netherlands

For the first time, The Republic of Cyprus and The Kingdom of Netherlands, have signed an agreement on 1st June 2021, to avoid double taxation.

The treaty will ensure the tax treatment of transactions between the two countries, providing stability and confidence to the investors. It will contribute to the additional development of economic and trade relations between the two countries and strengthen and promote investment opportunities between Cyprus and the Netherlands.

The Double Taxation Treaty Agreement was signed by the Minister of Finance of the Republic of Cyprus and the Ambassador of The Kingdom of The Netherlands in Cyprus, aiming to eliminate double taxation with respect to taxes on Income and the prevention of tax evasion and avoidance.

The Treaty is based on the provisions of the OECD Model Tax Treaty and will be in effect in the year following the year in which the ratification process in both countries is completed.

The main provisions of the DTTA are as follows:

Dividends

Dividends paid by a company which is a resident in a Contracting State to a resident of the other Contracting State may be taxed in that State. The tax so charged, shall not exceed 15% of the gross amount of dividends.

However, dividends shall be exempt from withholding tax if the dividends are beneficially owned by:

1. A recipient which holds at least 5% of the capital of the company paying the dividends throughout a 365-day period that includes the day of the dividend;
2. A recipient that is a recognized pension fund of the other Contracting State.

Interest

There is no withholding tax on payments of interest provided that the recipient is the beneficial owner of the income.

Royalties

There is no withholding tax on payments of royalties provided that the recipient is the beneficial owner of the income.

Capital Gains

Gains derived by a resident of a Contracting State from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State, may be taxed in that other State.

Certain exemptions have been agreed.

Limitation of Benefits

A benefit under this Treaty shall not be granted, in respect of an item of income, if it reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes (Principal Purpose Test) of any arrangement or transaction that resulted directly or indirectly in that benefit.

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