On 03/01/2018, the governments of Cyprus and Saudi Arabia signed an agreement for the Avoidance of Double Taxation (the DTT). The DTT 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.
The main provisions of the Agreement are as follow:
Withholding tax rate on interest payments
Interest includes income from debt-claims arising in a contracting state and paid to a resident of the other contracting state.
Withholding tax rate on dividend payments
Dividends paid from a Saudi Arabian company to a Cyprus company will not be subject to any Saudi withholding tax, on condition that the Cyprus company is the beneficial owner of the dividends and that it holds at least 25% of the capital of the Saudi company. Otherwise, there will be a 5% Saudi withholding tax.
Withholding tax rate on royalties payments
Royalties paid from a Saudi Arabian company to a Cyprus company will be subject to the following Saudi withholding taxes, provided that the Cyprus company is the beneficial owner of the royalties:
- 5% in the case of royalties paid with regards to industrial, commercial or scientific equipment.
- 8% in all other cases.
“Permanent Establishment” according to the DTT is a fixed place of a business through which the business of an enterprise is wholly or partly carried on. Any building site or construction or installation project constitutes a permanent establishment only if it lasts more than 6 months.
Capital Gains Tax
Gains from the disposal of immovable property are taxed in the country where such immovable property is situated.
Gains from the alienation of substantial participation (at least 25%) in a company which is resident of a contracting state may be taxed in that contracting state.
Shipping & Air Transport
Profits from the operations of ships or aircraft in international traffic shall be taxed only in the contracting state in which the place of effective management is situated.
Directors’ fees derived by a resident of a contracting state in his capacity as a member of a company’s board of directors, which is a resident of the other contracting state, may be taxed in that other state.