New Double Tax Agreement Between Cyprus And Iceland

Introduction

The new double tax agreement between Cyprus and Iceland, which was signed on November 13 2014, entered into force on December 22 2014. Its provisions apply to taxes withheld at source that are paid or credited on or after January 1 2015 and for other taxes in respect of taxable years beginning after that date. The agreement – the first between the two countries – is based on the Organisation for Economic Cooperation and Development (OECD) Model Convention for the Avoidance of Double Taxation on Income and extends Cyprus's network of double tax agreements to cover 53 countries. The agreement's main provisions are summarised below.

Dividends

Withholding tax on dividends paid by a company resident in Iceland to a company (but not a partnership) resident in Cyprus is limited to 5% of the gross dividend, provided that the recipient is the beneficial owner of at least 10% of the shares in the company paying the dividend. Otherwise, the maximum rate of