Cyprus and Jordan Sign a Double Tax Treaty

10/01/2022

On 17 December 2021 Cyprus and Jordan signed a Double Tax Treaty (DTT).

The treaty is based on the new OECD Model Tax Convention and includes all the minimum standards of the OECD Base Erosion and Profit Shifting (BEPS) project related to bilateral agreements.

The DTT provides for the following Withholding Tax (WHT) rates:

• Dividends: 5% if the beneficial owner is a company (other than a partnership) which holds directly at least 10% of the capital of the company paying the dividends.

In all other cases, the treaty provides for a maximum 10% WHT.

• Interest: 5%, as long as the recipient is the beneficial owner of such interest.

Nil for interest payments for which the beneficial owner is the government, a political subdivision, a local authority or the national bank of the other contracting state.

• Royalties and fees for technical services: 7%, provided that the recipient is the beneficial owner of such royalties/fees.

It is reminded that payments of dividends, interest and royalties (the latter when earned outside the country) from Cyprus to non-resident persons are fee from any Withholding Tax, irrespective of their destination (as long as they are not paid to EU blacklisted jurisdictions – please refer to our relevant newsfeed) and on whether they are physical or legal persons.

The DTT includes a Limitation of Benefits clause providing that the Tax Authorities of the contracting states are entitled to deny the application of treaty benefits if the obtainment of such benefit was one of the principal purposes of the relevant arrangement/transaction, unless the granting of such benefit would be in accordance with the object and purpose of the treaty.

The treaty will enter into force after the necessary ratification procedures are completed. Once it enters into force, the treaty will have effect in both contracting states on or after 1 January following the date the treaty enters into force.