On 4th of August 2015 Cyprus and Iran signed a double tax treaty (the “DTT”). The ratification procedures by the two countries are expected to be completed soon and the new treaty will become effective as from 1 January 2016.

The DTT is generally based on the OECD Model Tax Convention framework and applies to taxes on income as well as on gains from alienation of movable or immovable property.

The DTT provides for withholding tax on dividends, interest and royalty payments, at the following rates:

Dividends:

• 5% if the beneficial owner of the dividends is a company (other than a partnership) which holds directly at least 25% of the capital of the company paying the dividend.

• 10% is all other cases. This withholding tax will apply once either Cyprus or Iran introduces withholding taxes on dividends. Currently neither country imposes withholding tax on dividends paid to non-residents.

Interest: 5%

Royalties: 6%

The DTT also provides for the taxation of capital gains arising from the sale of shares of “property rich” companies.

The full text of the treaty can be found here:

On March 19th, 2015, Cyprus signed a new double tax treaty with the Kingdom of Bahrain.

The expansion of the double tax treaty network of Cyprus with countries in the Middle East has been one of the main objectives of the Cypriot Government over the last few years, with plans to extend Cyprus’ treaty networks in Iran, Israel, Jordan and Saudi Arabia.

The new treaty with the Kingdom of Bahrain

The new treaty, as with the other recent treaties conducted, is now based on the OECD Model Tax Convention framework.

The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Bahrain, the treaty covers the oil tax paid to it, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The treaty provides for zero withholding tax on dividends, interest and royalty payments.

The full text of the treaty can be found here: