On 17 January 2020, the Cyprus-Kazakhstan double tax treaty (hereafter the Treaty) entered into force. The application of the provisions of the Treaty starts as per the beginning of 2021. The Treaty is a welcome addition to Cyprus’ already quite impressive list of treaties with more than 60 countries.
The maximum rates of withholding tax included in the Treaty are as follows;
- 15% on dividends in general, but 5% if the beneficial owner is a company, which holds directly at least 10% of the capital of the company paying the dividends;
- 10% on interest (with certain exceptions for Governmental interest recipients); and;
- 10% on royalties.
Under the Treaty, gains derived by a resident of a Contracting State from the alienation of (non-listed) shares in the capital of a company based in the other Contracting State, deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State, may be taxed in the latter State.
Gains from the sale of shares in other companies may be taxed in the State of residence of the alienator.
Article 29 of the Treaty includes a so-called ‘’principal purpose benefit test’’. Based on this article, a benefit under the Treaty shall not be granted with respect to an item of income if it is reasonable to conclude, taking into account all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted in that benefit, unless it can be demonstrated that granting that benefit in the specific circumstances would be in accordance with the objective and purpose of the relevant provisions of the Treaty.