On 22nd of March 2018, Cyprus signed the new tax treaty with the UK which replaced the 1975 treaty between the two countries. The new treaty is based on the OECD Model Convention and its key provisions are the following:

Dividends, Interest and Royalties

No withholding tax (WHT) on dividends, interest and royalty payments with the exception of certain dividends paid out of income derived from immovable property by certain investment vehicles on which a maximum of 15% WHT may apply.

Capital Gains

Capital gains arising from the alienation of shares will be taxable only in the country of residency of the alienator, unless more than 50% of the value of such shares is directly or indirectly derived from immovable property situated in the other country.

Limitation of Benefits

The treaty includes a Limitation of Benefits Clause, by which the benefits provided in the tax treaty shall not be granted in the instance where obtaining such benefit was one of the principal purposes of the arrangement (i.e. treaty shopping).