Double Tax Treaty Between the Netherlands and Cyprus to Enter into Force from 2023

Published on 10/05/2022

Equation Corporate Services is proud of our position as a top bespoke corporate services provider in Cyprus. We are committed to supporting businesses through our local on-the-ground expertise and knowledge of the market. And as such, we always stay up to date with what is going on in all relevant business, financial and governmental sectors on the island.   

Such as news that the first tax treaty for the elimination of double taxation regarding taxes on income between Cyprus and the Netherlands, will enter into force from 2023. First signed in June 2021, following the completion of all legal procedures, the treaty will now have effect in both Cyprus and Netherlands.

With a goal of strengthening the relationship and bilateral cooperation between the two countries, the treaty also aims to encourage increasing cross-border investments. The main features of the Treaty are as follows:

Dividends

Dividends paid by a company which is a resident of one Contracting State, to a resident of the other Contracting State are exempt from tax in the former state, provided that they are beneficially owned by:

  • A company resident in the other State that holds directly at least 5% of the company paying the dividends throughout a 365-day period that includes the day of payment of the dividend.
  • A recognised pension fund of the other State, which is generally exempt under the company tax or corporate income tax laws of that State.  

Interest

Interest arising in one contracting State and beneficially owned by a resident of the other State may be taxed in the latter State only.

Royalties

Royalties arising in one contracting State and beneficially owned by a resident of the other State may be taxed in the latter State only.

Capital gains

Gains derived by a resident of one State from the alienation of immovable property situated in the other State may be taxed in the State in which the property is situated.
Gains from the alienation of unlisted shares deriving more than 50% of their value directly or indirectly from immovable property situated in the other State, may (with a few exceptions) also be taxed in the latter State. 
Anti-abuse clause
Article 26 of the Treaty stipulates that a benefit under the Treaty shall not be granted to income if it is reasonable to conclude that obtaining the benefit was one of the principal purposes of any arrangement or transaction that resulted in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the Treaty. 

Entry into force

The Tax Treaty will enter into force on 1 January 2023, as the parliamentary approval procedures have recently been completed in the Netherlands and in Cyprus. The Tax Treaty will apply to tax years, periods and taxable events occurring on or after 1 January 2023.

You can learn more about Double Tax agreements between Cyprus and internationally through the Ministry of Finance. And if this is something you would like further information on, or you believe it may impact your business, please do get in touch. Our local, on-the-ground experts are always on hand to show you how corporate services can help your business thrive. Send us an email at info@equationcs.com and we’ll get back to you within 24 hours.