The Double Taxation Avoidance Agreement between the Republic of Cyprus and the Grand Duchy of Luxembourg was signed on Monday, the 8th of May 2017 in Nicosia.
The Treaty was signed by the Ministers of Finance of the two countries, by Mr Harris Georgiades on behalf of the Republic of Cyprus and by Mr Pierre Gramegna on behalf of Luxembourg.
The double taxation treaty was signed with the aim to strengthen and further develop economic and commercial ties between Cyprus and Luxembourg, as Luxembourg was one of the few European countries with which Cyprus had no such convention in place.
The Agreement is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital and it incorporates all the minimum standards of the BEPS project and includes the articles of the Model Convention with respect to the exchange of financial and other information.
The double tax avoidance agreement is waiting ratification and is expected to come into force as from the 01/01/2018 upon ratification by both parties.
The treaty provides the following withholding tax rates:
Dividends: 0% withholding tax if there is at least 10% participation by a tax resident company and 5% in all other cases
Interest: 0% withholding tax on interest
Royalties: 0% withholding tax on royalties, if the recipient of the royalties is the beneficial owner of the income.
Profits arising from the sale of shares of immovable property are taxed in the country where the immovable property is located.