Cyprus and the Kingdom of Saudi Arabia have signed on 3 January 2018 a Double Tax Treaty (the “DTT
”) which will further develop the economic relationship and enhance the co-operation in tax matters between the two countries. The DTT will become effective on or after 1 January of the year following that in which all legal procedures are completed for the DTT to enter into force.
The DTT is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital and aims at the avoidance of double taxation with respect to taxes on income and the prevention of tax evasion. It further includes the exchange of financial and other information in accordance with the relevant Article of the Model Convention.
The main provisions of the DTT are briefly outlined below:
There is 0% withholding tax on dividends provided that the beneficial owner is a company (other than a partnership) which holds directly or indirectly at least 25% of the capital of the company paying the dividends. In all other cases, the withholding tax shall not exceed 5%.
There is 0% withholding tax on interest provided that the recipient of the interest is the beneficial owner of such income.
Provided that the recipient is the beneficial owner of the royalties, the withholding tax shall not exceed:
1. 5% of the gross amount of royalties which are paid for the use of, or the right to use, industrial, commercial or scientific equipment; and
2. 8% of the gross amount of royalties in all other cases.
Gains from the alienation of shares of a substantial participation (at least 25%) in the capital of a company (other than a company listed in a Stock Exchange) which is a resident of a contracting state, may be taxed in that contracting state.
The full text of the DTT and protocol can be found here.