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Updated double tax treaty between Cyprus and France

The Cyprus Ministry of Finance has announced the signing of an updated treaty for avoidance of double taxation between Cyprus and France on 11 December 2023. The new treaty will be activated upon the exchange of the ratification instruments, and once in force and effective, will replace the 1981 tax treaty between the two countries.

The revised Treaty was considered necessary for the purpose of being aligned with the latest international rules and developments on taxation, and to further enhance the economic ties between the two countries. According to the provisions of the agreement, it covers income tax, corporate tax, a special contribution for defense, and capital gains tax. It is based on the latest edition of the OECD Model Convention for the avoidance of double taxation, it incorporates the latest standards with regards to the exchange of information, mutual agreement procedure, arbitration, principal purpose test, and takes into consideration the recommendations of the BEPS action plan.

Main provisions of the Treaty are as follows:

  • Dividends: 0% withholding tax if the beneficial owner of the dividend is a company holding directly at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the payment, and 15% in all other cases.
  • Interest: 0% withholding tax
  • Royalties: 5% withholding tax
  • Capital gainsderived by a resident of a Contracting State from the alienation of shares (or comparable interests) in property-rich companies may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, such shares (or comparable interests) derive more than 50% of their value directly or indirectly from immovable property situated in that other State.