Entry into force of the double taxation agreement between Cyprus and the States of Jersey

The double taxation agreement between Cyprus and Jersey, which was signed on 11 July 2016, entered into force on 17 February 2017 following completion of all the requisite ratification procedures. It will take effect with regard to taxes withheld at source in respect of amounts paid or credited on or after 1 January 2018 and for other taxes in respect of tax years beginning on or after that date.

The new agreement, which closely follows the OECD Model Tax Convention, applies to taxes on income and on gains from alienation of movable or immovable property. In the case of Jersey, it covers the income tax, and for Cyprus it covers corporate and personal income tax, Special Contribution for Defence and capital gains tax.

There is no withholding tax on dividends, interest and royalty payments between residents of the two contracting parties. Capital gains arising from the disposal of shares, including shares in so-called property-rich companies (companies whose assets mainly comprise real estate) are taxable only in the state where the seller is tax resident. There is an exception for gains on shares of companies holding mineral exploration and exploitation rights or real property connected with them, which may be taxed in the state in which the rights or property are situated.

The agreement further expands Cyprus’s network of double tax agreements, and facilitates investment and trade between Cyprus and Jersey.