In order to fight ‘Aggressive Tax Planning’ (ATP), Cyprus announced two new corporate tax measures, emphasizing its willingness and commitment to support the relevant European Commission’s initiatives and to harmonize its tax system with several related EU guidelines and directives.
Cyprus will apply withholding tax (WHT) on dividend, interest, and royalty payments on an EU list of non-cooperative jurisdictions on tax matters. Under this new proposal by the Council of Ministers on 22 October 2020 that will also have to be also approved by the House of Representatives, dividend, interest, and royalty payments from the following jurisdictions will increase to 17% for dividends, 30% for interest, and 10% for royalties.
- American Samoa
- Trinidad and Tobago
- US Virgin Islands
Cyprus will also apply a second measure concerning the corporate tax residency test. Currently, a ‘management and control’ test is used to define the Cyprus tax residency for companies. The proposed new measure is set to introduce an additional ‘corporate tax residency test’ based on incorporation, in addition to the existing ‘management and control’ test.
For more information about withholding tax (WHT) please contact us.