Cyprus Tax Law Update – Double Tax Treaty between Cyprus and Egypt

The new double tax treaty (DTT) and accompanying Protocol between Cyprus and Egypt published in the Official Gazette on 18/10/2019 will be effective in Cyprus as from 01/01/2020. Once the new DTT comes into effect it will replace the existing DTT between Cyprus and Egypt (signed in 1993).
The new DTT is based on the new OECD Model Tax Convention with some alterations and aims to further develop the economic relationship and enhance co-operation in tax matters between the treaty partners. The new DTT provides inter alia for
1) secondary adjustments to profits that may be made for tax purposes where transactions have been entered into between associated enterprises in order to avoid economic double taxation;
2) up to 5% or 10% WHT on payment of dividends subject to certain conditions being satisfied, and subject to an additional WHT rate capped at 5% when the profits are remitted by a PE in the contracting state to the head office in the other contracting state;
3) up to 10% WHT on payment of interest and royalties subject to certain conditions being satisfied.
Note that under domestic legislation, there is 0% WHT on dividends, interest and royalty (used out of Cyprus) payments to non-residents. Furthermore, a wide range of specific issues are addressed in new DTT, including changes to the definition of permanent establishment (PE) and the introduction of an anti-treaty abuse provision; the so- called Principal Purpose Test (PPT) provision.
For more information, please contact Partner George Ioannou.