Cyprus – Croatia Double Tax Treaty

The double tax treaty between Cyprus and Croatia was signed on 17 October 2023 and ratified on 27 October 2023. Following the ratification by Cyprus, the treaty will be in effect in the year following the year in which the ratification process in the Republic of Croatia is also completed. It will replace the existing double tax treaty between Cyprus and the Socialist Federal Republic of Yugoslavia.

The main provisions of the treaty are as follows:

• Dividends
  A 5% withholding tax applies to the beneficial owner of the dividends.
• Interest
  A 0% withholding tax applies if the interest is paid to the beneficial owner of the other contracting state:
  • in connection with the sale on credit of any industrial, commercial or scientific equipment;
  • in connection with the sale on credit of any merchandise by one enterprise to another enterprise
  • on any loan of whatever kind granted by a bank.
  A 5% withholding tax applies in all other cases.
• Royalties
  A 5% withholding tax applies to the beneficial owner of the royalty.
• Capital Gains
  Gains derived by a resident of a contracting state from the alienation of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other contracting state at any time during the 365 days preceding the alienation, may be taxed in that other state.
  Exceptions apply to gains derived from alienation of shares:
  • Listed on an approved stock exchange
  • In the course of a corporate reorganisation
  • When the alienator is a recognised pension fund