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A double tax treaty (“DTT”) was signed between Cyprus and Lithuania in June 2013. The treaty which follows the OECD Model Convention for the avoidance of Double Taxation on Income and on Capital has been ratified by the two Contracting States and has entered into force as of 1 January 2015.
According to the DTT there is no withholding tax on dividend payments on the basis that the receiving company is the beneficial owner of said income and owns at least 10% of the capital in the dividend paying company. In a different case a 5% withholding shall be applicable. Further, no withholding tax shall be suffered on interest payments from one Contracting State to the other, and a 5% withholding tax on royalty payments.
It should also be noted that capital gains arising from the disposal of immovable property shall be taxed in the Contracting State that the property is situated. However, gains arising from the disposal of shares in companies that hold property shall be taxable in the State of residence of the company disposing the shares.
DTTs aim to promote and enhance the commercial and economic interaction between States by clearly defining where tax shall arise and by allocating the taxing rights between the Contracting States. Cyprus continues to expand its Double Tax Treaty network as a means to attract further investment and become a more accessible and transparent jurisdiction.