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Double tax treaties update
Cyprus became an attractive treaty partner for many countries after the implementation of the tax reform in 2003. The island has negotiated an extensive network of tax treaties and a number are still awaiting ratification. The latest tax treaties negotiated by Cyprus are summarized below.
In February 2003, an agreement for the avoidance of double taxation was signed between Cyprus and Lebanon in respect of taxes on income and capital.
In July 2005, the ratification of the tax treaty between Cyprus and Germany was agreed by both sides and is expected to take place in the near future. The new agreement clarifies the tax treatment in the shipping industry, where profit from international shipping and aircraft operations "shall be taxed only in the Contracting State in which the place of effective management of the enterprise is situated," and ships' crew will be taxed according to the residence of their employer rather than each crew member's residence, as was previously the case.
The new treaty has made Cyprus an attractive jurisdiction for German shipowners. Cyprus is already the third largest center for ship management in the world.
A significant step was taken by Cyprus and San Marino in November 2005, when a protocol leading to the future tax treaty between Cyprus and San Marino was signed. An agreement for the avoidance of double taxation between these two countries will be very attractive to Italian companies using San Marino for their international investment and tax optimization structures.
In July 2006, a tax treaty was signed by Cyprus and Seychelles. This movement will make Seychelles a jurisdiction of keen interest in the Indian Ocean and will enhance Cyprus' attractiveness as a treaty partner.
The tax treaties between Cyprus and Armenia, Finland, Singapore, South Africa and Ukraine are awaiting ratification.