The tax treaty between Cyprus and Bahrain entered into force and its provisions will take effect on the 1st January 2017.

The most significant provisions of the treaty are as follows:

  • Dividends, interest and royalties: These will only be taxed in the state of residence of the recipient.
  • Capital Gains: Gains resulting from the disposal of property will be taxed in the state where the property is situated. Gains arising from the disposal of shares will only be taxable where the alienator is resident.
  • Permanent Establishment: In a number of cases a permanent establishment will need to last for more than 12 months in order to be considered as such.

Please note that Cyprus domestic law states that payments of dividends and interest to non-residents are exempt from withholding tax in Cyprus. Similarly, royalties granted for use outside of Cyprus are also exempt from withholding tax in Cyprus.

Our View: The treaty is expected to expand trade between the two countries and attract foreign direct investments.

For more information please contact us.