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Double Tax Treaty between Cyprus and Jersey

Double Tax Treaty between Cyprus and Jersey

19 September 2016 Tax Law

Double Tax Treaty between Cyprus and Jersey

On July 11, 2016 Cyprus and Jersey signed a new Double Taxation Agreement (DTA). The agreement is the first comprehensive DTA between the two countries and will come into force once it has been ratified in accordance with their domestic legal procedures. The 2004 Agreement on Taxation of Savings Income between Cyprus and Jersey will continue to be in force, but the DTA will be more beneficial to taxpayers once it takes effect

Taxes covered

The agreement covers all taxes on income levied by either party or by any of a party's subdivisions or local authorities, including taxes on capital appreciation and on gains from the alienation of movable or immovable property. The specific taxes to which it applies are, in the case of Jersey, income tax; and, in the case of Cyprus, income tax, corporate income tax, Special Contribution for Defence (commonly referred to as SDC tax), capital gains tax and immovable property tax.

Offshore activities

The Cyprus-Jersey DTA agreement provides that a resident of one contracting party undertaking activities on the territory (including the territorial sea or exclusive economic zone) of the other will be treated as exercising a trade or business in the latter territory through a permanent establishment there in respect of the activities concerned, unless the aggregate duration of the activities is no more than 30 days in the fiscal year concerned. Associated companies are treated as one for the purpose of assessing the duration of their activities. 

Profits from maritime or air transport, towing, mooring, refuelling and similar activities in connection with offshore exploration and exploitation of resources are taxable only by the contracting party of which the enterprise concerned is a resident. 

Salaries, wages and other similar remuneration derived by a resident of one contracting party in respect of employment in connection with exploration or exploitation of sub-sea resources of the other contracting party may be taxed by the second contracting party.

Remuneration in respect of employment aboard a ship or aircraft engaged in the transportation of supplies or personnel in connection with the exploration or exploitation of sub-sea resources is taxable by the contracting party in which the enterprise providing the services is resident.

Gains derived by a resident of one contracting party from the alienation of exploration or exploitation rights or property used in connection with the exploration or exploitation of the seabed situated in the territory of the other contracting party may be taxed by the contracting party in whose territory the rights or the property are located. The same applies to shares deriving the greater part of their value directly or indirectly from such rights or property.

Conclusion

Jersey is among the world's most important financial centres and the DTA will be a valuable addition to Cyprus's extensive treaty network. It is hoped that the remaining steps required to bring the new DTA agreement into effect can be achieved quickly.