Cyprus to increase WHT on 12 jurisdictions and introduce additional test

Cyprus will introduce two new corporate tax measures in order to fight ‘Aggressive Tax Planning’ (ATP) in a move to emphasize its commitment and willingness to support the relevant European Commission’s initiatives and be harmonized with several related guidelines and directives.

The first measure will apply withholding tax (WHT) on dividend, interest, and royalty payments on an EU list of non-cooperative jurisdictions on tax matters. Under this new proposal by the Council of Ministers on 22 October 2020 (that will also have to be approved by the House of Representatives), dividend, interest, and royalty payments from the following 12 jurisdictions will increase:

• American Samoa

• Anguilla

• Barbados

• Fiji

• Guam

• Palau

• Panama

• Samoa

• Trinidad and Tobago

• US Virgin Islands

• Vanuatu

• Seychelles

• 
  

The Cyprus new withholding tax rates to be introduced are proposed to be 17% for dividends, 30% for interest, and 10% for royalties.

The second measure concerns the ‘corporate tax residency’ test. Presently a ‘management and control’ test is used to define the Cyprus tax residency for companies. The suggested new measure is set to introduce an additional ‘corporate tax residency test’ based on incorporation, in addition to the existing ‘management and control’ test.

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