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Cyprus & Finland Sign Double Tax Treaty


On November 15 2012, Cyprus and Finland signed a double tax treaty as well as protocol to this treaty. The treaty generally follows the OECD Model. Taxand Cyprus discusses what has been agreed between the two countries.

A maximum withholding tax rate at source has been set at 5% for dividends, where the beneficial owner is a company (other than a partnership) which controls directly at least 10% of the voting power in the company paying the dividends. In all other cases is 15%.

Respectively, a 0% withholding tax at source is provided for, both interest and royalties.

Certain deviations from OECD Model Tax Treaty can be noted such as:

  • The term Royalties include "films or tapes for television or radio broadcasting".
  • Income from immovable property (article 6(4)) provides that "where the ownership of shares or other corporate rights in a company entitles the owner of such shares or corporate rights to the enjoyment of immovable property held by the company, the income from the direct use, letting, or use in any other form of such right to enjoyment may be taxed in the Contracting State in which the immovable property is situated'.
  • To determine the residency (article 4 (3)) of a person other than an individual is a resident of both contracting states, the Contracting States shall settle the question by mutual agreement.
  • Article 11 (1) stipulates that interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner of the interest.
  • Arbitration is not included in mutual agreement procedures (article 23).

When it comes to elimination of double taxation Cyprus applies credit method and Finland applies both credit and the exemption with progression methods.

Your Taxand contact for further queries is:
Eylem Philippou
T. +357 22 699 222

Taxand's Take

The treaty is a welcomed step for all Cypriot and Finnish organisations, and will come into force once each state exchanges ratification notices.

Taxand's Take Author