Cyprus and France Sign a New Double Tax Treaty

17/01/2024

On 11 December 2023 Cyprus and France signed a Double Tax Treaty (DTT) which, once it enters in to force, will replace the existing treaty between the two countries, dated back in 1981.

The new DTT is based on the latest OECD Model Tax Convention and introduces, among others, the minimum standards of the Base Erosion and Profit Shifting (BEPS) actions. It also incorporates the latest standards related to exchange of information, mutual agreement procedure, arbitration, principal purpose test and other amendments that have been bilaterally agreed upon.

The main provisions of the DTT are as follows:

• Dividends: 0% Withholding Tax if the beneficial owner of the dividend is a company holding directly at least 5% of the capital of the dividend-paying company throughout a 365-day period that includes the day of the payment. In all other cases the rate increases to 10%.
• Interest: 0% Withholding Tax
• Royalties: 5% Withholding Tax
• Capital gains derived by a resident of a Contracting State from the alienation of shares (or comparable interests), which at any time during the 365 days preceding the disposal derive more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State, may be taxed in that other State.

The DTT will enter into force once the Contracting States complete their formal ratification procedures. The provisions of the treaty with respect to taxes will become effective as from 1 January of the year following the year in which the treaty enters into force.