Kazakhstan - Cyprus Double Tax Treaty
The double tax treaty between Cyprus and Kazakhstan was signed in Nursultan, Kazakhstan on 15th of May 2019 (the “Treaty”).
The Treaty is based on the OECD Model Tax Convention, a model for countries concluding bilateral tax treaties, aiming in removing tax related barriers to cross border trade and investment by implementing provisions for the avoidance of double taxation on income and capital gains tax.
Main Provisions of the Treaty:
1. Dividend Income
If the ultimate beneficial owner of a company is a company – not a partnership (as defined under Cyprus law), and holds a direct shareholding of at least 10% of the issued share capital of the company distributing the dividends, then the ultimate beneficial owner can benefit from the withholding of tax of 5%, whereas normally the tax is withheld at 15%. However, we note that irrespective of the above rates, as per the Cyprus legislation there is no tax withheld on dividend payments to non-Cyprus tax residents.
2. Interest Income
If the recipient of the interest income is the ultimate beneficial owner of such income, then the is tax is withheld at 10%. However, we note that irrespective of the 10% of tax rate, as per the domestic Cyprus tax legislation no Cyprus tax is withheld on interest payments to non-Cyprus tax residents.
If the recipient of the royalties is the ultimate beneficial owner of such income, then the tax is withheld at 10%. In accordance with Cyprus law, there is no withholding tax on 10% if the outbound dividends or interest payments. However, tax is withheld only on royalty payments of royalties that are used within Cyprus.
4. Capital Gains Tax
The capital gains derived from the disposal of shares in a company, which derives more that 50% of its value, either directly or indirectly, from the immovable property may be taxed in the country in which the immovable property is situated, with the sole exception of the disposal of shares in a company listed on an approved stock exchange.
The Treaty aims in further enhancing the economic and commercial relationship between the two countries and promote Cyprus as an international business hub.
The provisions of the Treaty will be enforceable on 1st of January 2020, provide that the relevant ratification processes are completed by both counties during 2019.