Tax Treaty between Cyprus and The Netherlands

On 1st June 2021, Cyprus and The Netherlands signed a Double Tax Treaty that follows the provisions of the OECD Model Tax Treaty. The Treaty was by the Minister of Finance of the Republic of Cyprus and the Ambassador of The Kingdom of The Netherlands in Cyprus. The Treaty will be in effect in the year following the year in which the ratification process in both countries is completed.

Below is a summary of the main provisions of the Treaty.

Dividends (Article 10)

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:
a) 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;
b) A recipient that is a recognized pension fund of the other Contracting State.

Interest (Article 11)

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

Royalties (Article 12)

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

Capital Gains (Article 13)

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 (Article 26)

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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