Double Tax Treaty Between Cyprus and the Republic of Kazakhstan

  • By:Melissa Speigner

The double tax treaty for the avoidance of double taxation between the Republic of Cyprus and that of Kazakhstan shall enter into full force from 1st January 2021, (hereinafter the ‘Treaty’) The salient points of the Treaty, among others, are the taxation of dividends, interest, capital gains and royalties.

Withholding Tax Rates

  1. Dividends:
    • 5% – if the company directly owns at least 10% of the capital dividend payer, or
    • 15% – in all other cases.
  2. Net income of a Permanent Establishment (P.E.) – 5%.
  3. Interest – 10%
  4. Royalty – 10%

Permanent Establishment (PE)

The wording of the “PE” is taken from the OECD Model Tax Convention as amended in 2017 and includes both construction activities lasting for a period of more than 6 months within any twelve month period, as well as the provision of services for a period or periods totaling more than 183 days in any twelve month period.

Corporate Income Tax (CIT)

Foreign legal entities are taxed only on income derived from sources within Kazakhstan or income derived through activities performed by a Permanent Establishment (PE) in Kazakhstan.

Capital Gains

In terms of the Treaty, any gains derived by a resident of a contracting state from the sale/disposal/alienation of shares or comparable interests in the capital of a company of the other contracting state that derives more than 50% of its value directly or indirectly from immovable property situated in the other state may be taxed in that other state.

Cyprus under its domestic law does not levy withholding tax on dividends paid, if the Kazakh parent company holds at least a minimum 1% participation in a Cypriot subsidiary. Also, Cyrus does not impose a minimum holding period in order to benefit from such withholding tax exemption. Gains obtained from the sale/disposal/alienation of any property outside of Cyprus are also exempted.

Exchange of Information (EOI)

The Convention includes general regulations based on the OECD Model regarding the exchange of information. The authorized bodies of Kazakhstan and Cyprus are entitled to exchange information necessary for the implementation of the provisions of the Convention.

Offshore Activities:

Under Article 21 of the Treaty, any enterprise of a contracting state that carries out offshore activities, (offshore activities are defined as the exploration and exploitation of the seabed and subsoil and their natural resources) in the other contracting state will be deemed to have a PE in the other state. This does not apply if such activities cover an aggregate of 30 days or less in any 12 month period beginning or ending in the fiscal year concerned.

Posted in: International Taxation