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Cyprus – Switzerland Double Tax Treaty comes into effect as from 1st January 2016

The ratification procedure of the Double Tax Treaty signed between Cyprus and Switzerland in 2014 has been completed and as a result the Treaty will come into effect as from 1st January 2016.

The main provisions of the Double Tax Treaty are as follow:

Permanent Establishment

The permanent establishment definition included in the treaty is in line with the meaning provided in the OECD model tax convention. In particular, any building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 12 months

Withholding tax rate on dividend payments –  0% withholding tax if the beneficial owner is:

  • A company (other than a partnership) the capital of which is wholly or partly divided into shares and which holds directly at least 10% of the capital of the company paying the dividends for an uninterrupted period of at least one year or;
  • A pension fund or other similar institution recognised as such for tax purposes, or
  • The government, a political subdivision, local authority or central bank of one of the two contracting states

15% withholding tax in all other cases.

Withholding tax rate on interest payments – 0% withholding tax

Withholding tax rate on royalties payments – 0% withholding tax

Capital Gains Tax
Gains from the disposal of immovable property are taxed in the country where the immovable property is situated.

Gains from the disposal of shares, deriving more than 50% of their value directly or indirectly from immovable property are taxed in the country in which the immovable property is situated, unless:

  • Shares are listed on a Stock Exchange or
  • The property is used in the company’s business or
  • The sale is as a result of corporate reorganization.

In all above cases, any gains are taxable in the country of which the seller is resident.