Double Taxation Treaty between Cyprus and the Netherlands

On June 1st 2021, the Republic of Cyprus and the Kingdom of the Netherlands concluded a convention for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (the “Treaty”).  Cyprus is the last member of the European Economic Area (EEA) to sign such a treaty with the Kingdom of the Netherlands.

The Treaty contains clauses for the prevention of double taxation and tax avoidance, aiming to ensure a definite amount of legal certainty for taxpayers in both Cyprus and the Kingdom of the Netherlands. In more detail:

  • Dividends: If dividends are paid by a company which is resident in either Cyprus and/or the Kingdom of the Netherlands to a resident of the other contracting state they may be taxed in that other state. This tax shall not exceed 15% of the gross amount of the dividends. Moreover, under the Treaty a company based on a contracting state will be fully relieved from withholding taxes on dividend payments to corporate investors provided that they hold directly at least 5% of the capital of the company paying the dividends throughout a 365-day period. The said exemption also applies for certain recognised pension funds, provided that they are exempt under the corporate tax legislation of the contracting jurisdictions.
  • Interest: Regarding the interest arising in a Contracting State and paid to the beneficial owner who is resident of a Contracting State, such interest shall be taxable only in the Contracting State in which the beneficial owner is resident.
  • Royalties: The royalties arising in a Contracting State and beneficially owned by the resident of the other Contracting State shall be taxable in that other Contracting State.

Ratification has not been effected, thus no date of entry into force of the Treaty is yet available. It shall probably come into force from 1st January 2022.