Luxembourg’s tax administration has released on its website the text of a tax treaty and protocol signed by the Luxembourg and Cyprus governments.
The new treaty, which has not yet been ratified, would be the first tax treaty between the two countries. It was signed on May 8.
The treaty reduces withholding tax on dividends to zero if the beneficial owner is a company that holds at least 10 percent of the payer and to 5 percent in other cases. Withholding taxes on interest and royalties are not levied.
The treaty includes provisions on exchange of information as well as a principal purposes test consistent with OECD/G20 base erosion profit shifting (BEPS) plan minimum standards. Also consistent with BEPS standards, the treaty states that it is not designed to create opportunities for double non-taxation or reduced taxation through evasion or avoidance.