On 3 January 2018, the governments of Cyprus and Saudi Arabia signed an agreement for the Avoidance of Double Taxation (DTA). The DTA was signed during the official visit of the President of the Republic of Cyprus to Saudi Arabia and is based on the OECD Model Tax Convention.

Main Provisions

Dividends: Dividends paid from a Saudi company to a Cyprus company will not be subject to any Saudi withholding tax, provided that the Cyprus company is the beneficial owner of the dividends and it holds at least 25% of the capital of the Saudi company. Otherwise, there will be a 5% Saudi withholding tax.

Interest: Interest paid from a Saudi company to a Cyprus company will not be subject to any Saudi withholding tax, provided that the Cyprus company is the beneficial owner of the interest income.

Royalties: Royalties paid from a Saudi company to a Cyprus company will be subject to the below Saudi withholding taxes, provided that the Cyprus company is the beneficial owner of the royalties:

  • 5% in the case of royalties paid in relation to industrial, commercial or scientific equipment.
  • 8% in all other cases.

Enter into force

The treaty will enter into force once formal ratification procedures have been completed, both in Cyprus and Saudi Arabia. The provisions of the treaty will have effect in both contracting states on or after the 1 January following the date the treaty enters into force.

ATCA’s view

The Convention is expected to enhance the economic relationship between the two states. During 2016, the government of Saudi Arabia approved a plan for far reaching reforms to diversify the economy away from oil. Cyprus can play an important part in this effort, since foreign investments in the Saudi economy can be structured through Cyprus. From a Cypriot point of view, upgrading and expanding the network of Double Taxation Conventions is of high importance and aims to further strengthen Cyprus as an international business center.

How we can help

Feel free to contact us should you wish to discuss the terms of the treaty and/or how to structure your investments through Cyprus.

Contact

Constantinos Markou
Director
Head of Tax Services
markou@atca.com.cy
+357 25661717