Cyprus: Double Taxation Agreements Round-Up

Cyprus: Double Taxation Agreements Round-Up

Last Updated: 4 June 2014
Article by Philippos Aristotelous

Signing of new double tax agreement between Cyprus and Norway

The Cyprus government has announced the signature of a new double taxation agreement with Norway. Double taxation avoidance between Cyprus and Norway is currently regulated by the 1951 double tax agreement between Norway and the United Kingdom, which was extended in 1955 to include several British colonies, including Cyprus. On becoming independent, most of the newly independent countries negotiated new arrangements, but Cyprus has not done so until now.

The new agreement is based on the OECD Model and provides for the exchange of information in accordance with the relevant articles of the Model. It will take effect once it has been ratified by both countries. The Cyprus government attaches great importance to maintaining, updating and expanding Cyprus's network of double tax treaties in order to attract foreign investment and promote Cyprus as an international business centre, and has expressed confidence that the new agreement will contribute to the further development of trade and economic relations between Cyprus and Norway.

The new Cyprus-Latvia double taxation agreement

Negotiations between the governments of Cyprus and Latvia on a new double taxation agreement, which began in 2006, appear to be reaching the final stages. The Latvian authorities have now published the text of the final draft agreement, which requires the approval of the Latvian Cabinet of Ministers before signature. After signature it will need to be ratified by both countries before taking effect.

On independence Latvia did not adopt the Cyprus-USSR double taxation agreement of 1982, and there is currently no double taxation agreement in force between the two countries. The Latvian government announced the commencement of negotiations on an agreement with Cyprus in 2006 and it is hoped that the remaining steps in concluding the agreement and bringing it into effect can be achieved quickly. If it takes effect in its current form, the agreement will be Cyprus's first to include an article dealing with offshore activities, reflecting its newly-discovered energy resources. In the meantime, although there is no agreement in existence, the Cyprus tax authorities will doubtless follow their normal practice of allowing unilateral relief for Latvian taxes paid.

Imminent entry into force of the new double taxation agreement between Cyprus and Spain

Article 27 of the new double taxation agreement between Spain and Cyprus provides that the agreement will enter into force three months after the exchange of official notifications between the governments concerned that all ratification procedures have been completed. We understand that notifications were exchanged in March, which means that the new agreement should enter into force during June 2014. The Cyprus tax authorities have indicated that they will allow the benefits included in the new agreement with effect from 1 January 2014.

Amendments to the Cyprus – India double taxation avoidance agreement to be finalised in the next few weeks

It is reported in the Indian financial press that Cyprus and India will finalise the amendments to their double taxation avoidance agreement in the next few weeks. This will resolve the differences between the two countries' tax authorities that led to Cyprus being declared a notified jurisdiction under Section 94A of the Indian Income Tax Act of 1961, making it more cumbersome for Indian taxpayers to claim deductions on transactions with entities based in Cyprus, and increasing reporting requirements. Both Cyprus and India have agreed that the classification of Cyprus as a notified jurisdictional area will be rescinded with retrospective effect from 1 November 2013, the date when the notification was first issued. The rescission will remove bureaucratic obstacles and reduce compliance costs.

According to Indian government estimates, Cyprus is the seventh largest investor in India with cumulative investments of US$7.2 billion between April 2000 and December 2013.