Tax Update February 2020

Cyprus and the Kazakhstan have concluded and signed a Double Tax Treaty (DTT) which was now ratified and will come into effect as from 1 January 2021. The treaty is based on the OECD Model Tax Convention framework.

The main provisions of the DTT are the following:

Dividends

There is a 5% withholding tax where the beneficial owner of the dividend is a company (other than a partnership) holding directly at least 10% of the share capital of the dividend paying company.

The withholding tax in all other cases is 15%.   

Interest

There is a 10% withholding tax on interest payments where the recipient is the beneficial owner of the interest income.

No withholding tax shall apply where the beneficial owner of the interest income is  the Government of the other Contracting State, a political subdivision, a central or local Authority, the Central Bank or any other financial institution wholly owned by the Government of the other Contracting State

Royalties

There is a 10% withholding tax on royalty payments where the recipient of the royalties is the beneficial owner of the income.

Gains on disposal of shares

Gains from the disposal of shares of a company deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State may be taxable in that other Contracting State, with the exemption of shares listed on an approved stock exchange.  

Limitation provision

The DTT includes a limitation provision (application of principal purpose test) covering the cases where the recipient of the income was established in the treaty country with the principal purpose being that of obtaining a benefit under the treaty.