The Double Tax Treaty with Iran has been signed on 4^th August 2015 and will enter into force upon completion of the ratification process by both contracting states.

Below is a summary of the main provisions that are included in the treaty:

Dividends:

·  Dividend payments will be subject to a WHT of 10%, which may be reduced to 5% if the beneficial owner (other than a partnership) holds directly at least 25% of the capital of the dividend paying company.

·  However, under Iranian domestic law, dividend payments to non-Iranian tax residents are exempt from any withholding in Iran and therefore, in practice no withholding is expected to apply for dividend payments from Cyprus or Iran.

Interest:

·  Interest payments from Iran to the Cypriot beneficial owner of the interest will be subject to a WHT at a rate of 5%.

·  Interest payments derived by a government, governmental authority, central bank or other state-owned banking institution of a contracting state would be exempt from any withholding tax.

·  However, under Iranian law, interest payments to non-Iranian tax residents are subject to a withholding tax of 3% and therefore, the lower rate of 3% is expected to apply for interest payments from Iran to Cyprus.

Royalties:

· Royalty payments from Iran to the Cypriot beneficial owner of the royalty will be subject to a WHT at a rate of 6%.

· Under Iranian domestic law, royalty payments to non-Iranian tax residents are subject to a withholding tax of either 5 or 7,5%.

Capital Gains:

· Capital gains derived from the sale of shares will be taxable only in Cyprus, unless the shares derive more than 50% of their value directly from immovable property situated in Iran. In this respect, such gains will be subject to taxation in Iran.

Limitation of Benefits:

· The Treaty does not contain a limitation of benefits clause.

All content prepared by KPMG Cyprus.