Introduction
The Cyprus double tax treaties have been drafted very closely to the Organisation in Economic Cooperation and Development (O.E.C.D) Model Treaty.  The O.E.C.D model has been changed where necessary in order to conform with the tax systems of the countries concerned.

Cyprus provides substantial tax advantages to foreign investors, coupled with the provision of the double tax treaties, it makes good sense to make good use of such treaties.

It is certainly the policy of the Cyprus Government to encourage tax incentives for aliens, in order to develop Cyprus as a financial center in its area, without, proclaiming or promoting itself as a tax haven.

The following form part of the main provisions included in the O.E.C.D model:-

Permanent establishment
It has the same meaning as defined in the O.E.C.D. Model Tax Convention on Income and on Capital with the exemption of a building site or construction or installation project, which constitutes a permanent establishment only if it lasts more that three (3) months.

Tax residence

Resident of the Republic with reference to:-

i. An individual means a person residing in the Republic for one or more periods exceeding in the aggregate more that 183 days in a year of assessment.

ii. With reference to a company means a company of which the management and control is exercised in the Republic.  Management and control is not defined in the Law and it must be taken to have the meaning established by Court decisions in England and Cyprus.  As a rule of thumb it could be said that if the majority of the directors of the company are residents in the Republic, board meetings are held in Cyprus, important management decisions are taken in Cyprus, management and control is likely to be deemed to be exercised in the Republic.

Limitation of treaties

In some of the double tax treaties that have been established a number of anti avoidance provisions exist.  These are to be found in the treaties with the France, Germany, UK, U.S.A. and Canada.

Double tax treaties and Eastern Europe

There are three main factors, besides the geographical one, which justifies the description of Cyprus as a “turn-table between East and West” both with regards to business relations and to the resulting tax consequences:-

The number of double tax treaties which Cyprus has concluded with Eastern Europe.

The extensive number of treaties that Cyprus has with countries other that those of Eastern Europe.

The favourable tax regime which is applicable under Cyprus legislation to non residents.

Thus, Cyprus treaties with Eastern Europe enable a Cyprus legal entity to extract from East European countries profits at reduced tax rate or with no tax at all.