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Cyprus - Luxembourg Double Tax Treaty

A double tax treaty with Luxembourg will come into effect on 1st January 2019.

The main provisions of the treaty are as follows: -

  • Dividends - no withholding tax will be levied on dividend payments where the recipient is a company, being the beneficial owner of the dividends and holds at least 10% of the capital of the dividend paying company. If the above are not met then withholding tax to a maximum of 5% will be levied.
  • Interest - no withholding tax will be levied on interest payments made where the recipient is the beneficial owner of the interest, unless the interest arises from a permanent establishment situated in the other State. The exemption does not apply in the case where the interest paying and receiving entities are connected and the interest rate exceeds the rate that would be applied in an arm’s length transaction.
  • Royalties - no withholding tax will be levied on royalty payments where the recipient is the beneficial owner of the royalties. The exemption does not apply where the royalty paying and receiving entities are connected parties and the royalties exceed the charge that would be applied in an arm’s length transaction.
  • Capital gains – the one’s arising from the disposal of shares of a company will be taxable only in the State of residency of the seller, unless more than 50% of the value of such shares is derived directly from immovable property situated in the other State.

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