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Cyprus and Spain sign new Double Tax Treaty
18.02.2013
Area(s) of Practice: Taxation Law

Cyprus and Spain entered into a new Double Tax Treaty (DTT) on 14 February, 2013. The treaty will enter into force three months after its ratification and for taxes on income and capital at the beginning of the year following the date the DTT enters into force.

The main provisions of the new treaty are as follows:

Dividends
No withholding tax shall be imposed on dividends, as long as the beneficial owner is a company holding at least 10% of the capital of the subsidiary paying the dividend. A 5% withholding tax shall be imposed in all other cases.

Interest
No withholding tax shall be imposed on interest.

Royalties
No withholding tax applies with respect to copyrights of literary, artistic or scientific work including films, any patent, trademark, secret formula or process or for information concerning industrial, commercial or scientific experience

Capital gains
Capital gains from the disposal of immovable property shall be taxed in the country where the immovable property is situated. Capital gains from the disposal of shares of companies registered either in Cyprus or Spain, (deriving by more than 50% in their value from immovable property), shall be taxed in the country where the immovable property is situated. Gains from the disposal of any other type of shares shall be taxed in the country of residence of the seller.

Following the conclusion of this new double tax treaty which complies with the international provisions on exchange of information, it is expected that Spain will remove Cyprus from its "black list" of uncooperative jurisdictions.

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