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Cyprus – Iran DDT

Cyprus – Iran DDT

19 September 2016 Tax Law

On August 4th 2015, Cyprus signed a Double Tax Treaty (DTT) with Iran. The new treaty is based on the OECD’s Model tax convention framework (the OECD Model) and will contribute to the expansion of Cyprus’ trade and economic relations with Iran. The treaty came into effect on January 1st 2016. The main provisions of the treaty are specified in the paragraphs below:

Permanent establishment:

The permanent establishment definition in the treaty reproduces the provisions of the OECD Model verbatim, in particular, any building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 12 months.

Dividends:

  • 5% withholding tax on dividends paid, if the beneficial owner of the dividends is a company holding at least 25% of the capital of the company paying the dividend;
  • 10% withholding tax on dividends paid in all other cases.

Currently, neither Iran nor Cyprus withholds any tax on dividends. The above provisions will apply only in case a Contracting state imposes withholding tax in its domestic legislation.

Interest:

  • 5% withholding tax

Royalties:

  • 6% withholding tax

Capital Gains Tax:

Gains from the disposal of immovable property may be taxed in the country where the immovable property is situated. Gains from the disposal of shares, deriving more than 50% of their value directly or indirectly from immovable property may be taxed in the country in which the immovable property is situated.