Cyprus-Iran Double Taxation Treaty

On 4 August 2015, the governments of Cyprus and the Islamic Republic of Iran signed a Double Taxation Treaty (DTT), paving the way for increased trade and investment between the two countries following the lifting of international sanctions against Iran. The DTT is based on the OECD Model Tax Convention and is expected to come into force following the completion of the ratification process by both countries. The treaty provisions, in respect to taxes, shall be enforced on or after 1 January after the date on which the treaty enters into force. The most significant provisions of the new treaty are summarised below.

Permanent Establishment
The treaty adopts the definition provided in the OECD Model Tax Convention stating that: a building site, a construction, assembly or installation project, or supervisory activities in connection therewith, constitutes a “permanent establishment” only if it lasts more than 12 months

Dividends

• 5% withholding tax of the gross amount if the beneficial owner is a company (other than a partnership) holding directly at least 25% of the capital of the company paying the dividend
• 10% in all other cases

Royalties
6% withholding tax of the gross amount if the recipient is the beneficial owner of the royalties

Interest
5% withholding tax of the gross amount if the recipient is the beneficial owner of the interest

Capital Gains

• Gains derived from the disposal of immovable property may be taxed in the country where the immovable property is situated
• Gains derived from the disposal of shares, deriving more than 50% of their value directly from immovable property, may be taxed in the country where the immovable property is situated

Benefits of Cyprus
With an extensive network of more than 50 international tax treaties, a well-established companies framework and experienced service providers staffed by qualified personnel, as well as being the European Union Member closest to Tehran, Cyprus is rightly positioned as a premier gateway jurisdiction for international investors targeting Iran.