An Agreement between the Republic of Cyprus and Kuwait for the Avoidance of Double Taxation was signed on 5 October 2010.

On the date the new Agreement is been ratified by both countries, the provisions of the existing treaty dated 1984 between the Government of the Republic of Cyprus and Kuwait will expire.

Withholding Tax Rates

A major benefit of the new treaty is the elimination of withholding tax on dividends and interest. The 1984 treaty provided for a withholding tax of 10%.

Permanent Establishment

Under the new treaty provision of consultancy or managerial services through employees or other personnel for a period of more than 6 – months within any 12-month period gives rise to a permanent establishment.

Directors’ Remuneration

Under the new treaty fees received by a resident of one contracting state in respect of services as a director of a company resident in the other contracting state are taxable in the state in which the director is resident. Under the 1984 treaty such fees were taxable in the country of residence of the company.

Other amendments

The articles on mutual agreement procedures and exchange of information have been aligned with the equivalent provisions of the current OECD Model Convention equivalent provisions and the obligations and powers of the contracting states have been clarified.

The above is intended to provide a brief guide only. It is essential that appropriate professional advice is obtained.