In short
- Signed 22 March 2018, in force 18 July 2018; a protocol signed 19 December 2018 entered into force 2 October 2019.
- Articles 10 to 12 take dividends, interest and royalties out of tax at source for a UK-resident owner.
- Cyprus withholds 10% on royalties used there and nothing on dividends or interest. Article 12 removes the 10%.
- A Cyprus residence certificate costs €80 in fee stamps, on form T.D.98 for a company and T.D.126 for a person.
In this guide
The UK-Cyprus double tax treaty: title, signing dates and protocol
The treaty is the Convention between the United Kingdom and the Republic of Cyprus for the elimination of double taxation on income and on capital gains and the prevention of tax evasion and avoidance. It has 30 Articles. The two governments signed it at Nicosia on 22 March 2018, and it replaced the convention of 20 June 1974, which ceased tax by tax as the new one took effect.
| Instrument | Signed | In force and applies from |
|---|---|---|
| Convention of 2018 | 22 March 2018 | In force 18 July 2018. Withholding taxes on payments from 1 January 2019. Other Cyprus taxes from 1 January 2019. UK income tax and capital gains tax from 6 April 2019, UK corporation tax from 1 April 2019 |
| Protocol of 2018 | 19 December 2018 | In force 2 October 2019, with effect from 1 January 2019 |
Cyprus published the convention in its Official Gazette no. 4238 of 2 April 2018, and the Ministry of Finance lists the UK as entry 69 of 72 in its register. After five years in force, either state can end the treaty on notice of at least six months before the end of a calendar year (Article 30).
The returns and filings of your company are part of Cyprus corporate tax services.
Who gets the treaty benefits: residence under Article 4
A person claims the treaty as a resident of one of the two states. Article 4(1) defines a resident as a person liable to tax in a state by reason of domicile, residence, place of management, place of incorporation or a similar criterion.
An individual resident in both states goes through five tests in order (Article 4(3)). They are permanent home, closer personal and economic ties, habitual abode, nationality and, last, the mutual agreement of the two tax authorities. It does not count days. The day count that makes a person tax resident in Cyprus is in Cyprus tax residency: the 183-day and 60-day rules.
Article 4(4) gives a company no rule of its own. The two tax authorities try to agree on one state, having regard to the place of effective management, the place of incorporation and other factors. Without an agreement the company gets no treaty benefit, except under Articles 22, 24 and 25.
Article 4(4) gives a company no rule of its own. The two tax authorities try to agree on one state, having regard to the place of effective management, the place of incorporation and other factors. Without an agreement the company gets no treaty benefit, except under Articles 22, 24 and 25.
In Cyprus a company is tax resident in Cyprus if it is managed and controlled there or incorporated there, as a company formed through company formation in Cyprus is. The Tax Department adds that the incorporation test gives way where a treaty treats the company as resident of the other state. A Cyprus company whose board sits in the UK can come under Article 4(4).
Dividends, interest and royalties: Articles 10, 11 and 12
| Income | Article | What the treaty text says |
|---|---|---|
| Dividends | 10(2)(a) | Exempt from tax in the state of the paying company when the beneficial owner is a resident of the other state |
| Interest | 11(1) | Taxable only in the state where the beneficial owner is resident |
| Royalties | 12(1) | Taxable only in the state where the beneficial owner is resident |
Two conditions apply. The recipient must be the beneficial owner. The shares, loan or right must not be effectively connected with a permanent establishment of the recipient in the paying state, which sends the income to Article 7.
How a Cyprus company declares the dividend is in how to distribute dividends in Cyprus. Article 12(2) counts copyright, patents, trade marks, designs and know-how as royalties.
Profits, permanent establishment and gains: Articles 5, 7 and 13
| Subject | Article | What the treaty text says |
|---|---|---|
| Permanent establishment | 5(1), 5(3) | A fixed place of business. A building site or installation project counts only if it lasts more than twelve months |
| Business profits | 7(1) | Taxable only in the state of the enterprise, unless it has a permanent establishment in the other state, which taxes the profits attributable to it |
| Gains on property | 13(1), 13(2) | May be taxed where the immovable property lies, as may shares deriving more than 50% of their value from it, unless they trade regularly on a stock exchange |
| Other gains, including shares | 13(5) | Taxable only in the state where the seller is resident |
For a Cyprus company with UK customers, Article 7(1) leaves the profit to Cyprus when the company has no permanent establishment in the UK. Article 5 decides that: an office in the UK counts, a stock kept only for storage or delivery does not.
Directors' fees and salaries: Articles 14 and 15
| Income | Article | What the treaty text says |
|---|---|---|
| Salary for work in the other state | 14 | Taxable where the work is done, with a 183-day exception for the employee of a foreign employer |
| Directors' fees | 15 | May be taxed in the state where the company is resident |
The Tax Department states that fees from a company resident in Cyprus are taxed in Cyprus whatever the days spent there, unless the treaty says otherwise. Article 15 does not, so Cyprus taxes the fee of a UK-resident director.
We do this for you Cyprus corporate tax services from €290 a month with accounting
Cyprus withholding tax on payments to the UK, beside the treaty
Cyprus withholds tax on three payments to non-residents, under Articles 21 to 24 of the Income Tax Law. The Tax Department's page lists no other, so dividends and interest are not on it. The payer deducts the tax from the gross amount and pays it through Tax For All by the end of the next month. A payment made in March is due on 30 April.
| Payment | Cyprus rate | Under the UK treaty |
|---|---|---|
| Royalties for rights used in Cyprus | 10% of the gross amount | Article 12: taxable only in the UK |
| Rental of films shown in Cyprus | 5% of the gross amount | Article 12(2) lists films among copyright royalties |
| Fees of professionals, artists and sportspersons for activity in Cyprus | 10% of the gross amount | Article 7 for professional services without a permanent establishment. Article 16 lets Cyprus tax entertainers and sportspersons |
| Dividends | None | Article 10(2)(a): exempt at source |
| Interest | None | Article 11(1): taxable only in the state of the owner |
Where a treaty applies, the Tax Department says its provisions prevail when they favour the taxpayer. The rate can fall to zero if the treaty's terms are met and tax residence certificates are produced. The Special Defence Contribution on dividends reaches only residents of Cyprus who are domiciled there. Its 17% and 5% rates for companies in non-cooperative or low-tax jurisdictions do not reach the UK, which is not on the 2026 low-tax list.
Example: a dividend, a royalty and a fee from a Cyprus company
| Payment to the UK | Cyprus tax, domestic law | Cyprus tax, with the treaty |
|---|---|---|
| Dividend of €100,000 to a UK-resident shareholder | €0 | €0 |
| Royalty of €40,000 for software used in Cyprus, owner resident in the UK | €4,000 (10%) | €0 |
| Fee of €25,000 to a UK consultancy for work in Cyprus, no permanent establishment there | €2,500 (10%) | €0 under Article 7 |
How to claim the treaty from the Cyprus side: certificate and forms
Claims run in two directions. A Cyprus company or person with income from the UK proves Cyprus residence with a certificate from the Tax Department. A UK resident with income from Cyprus asks Cyprus for an exemption or a refund.
Cyprus tax residence certificate, step by step
- Check that Cyprus has a treaty with the country that asks. The Tax Department prepares the certificate only where one exists, and the UK is on its list.
- Fill in form T.D.98 for a company or T.D.126 for an individual. Both are in Greek. If the UK side supplies its own form, you send that one for stamping.
- Attach the documents. A company attaches its certificate of incorporation. An individual attaches an identity document, a title deed or tenancy agreement, a utility bill of the last six months, an employment contract and a social insurance statement.
- Send both by email or post to the Tax Department office of your district.
- An officer prepares the certificate and calls you. You pay €80 in fee stamps at the cash counter, hand the stamp to the officer and receive the certificate.
The Tax Department's page states no processing time.
A UK resident asks Cyprus to exempt the tax withheld, or to refund it, on form T.D.156 (2016), which is in Greek. The Nicosia District Office alone examines it. The payer's DAS return goes through Tax For All.
For a Cyprus company that pays or receives across the UK border, the check of the treaty before the payment is part of Cyprus corporate tax services.
Relief, anti-abuse and disputes: Articles 22 to 26
| Article | What the treaty text says |
|---|---|
| 22(2) | Cyprus credits UK tax paid under the convention against Cyprus tax on the same income, up to the part of the Cyprus tax that belongs to it |
| 23 | A benefit is denied when obtaining it was one of the principal purposes of an arrangement, unless granting it fits the purpose of the provision |
| 25 | A person taxed against the convention presents the case to either competent authority within three years of the first notification, and can ask for arbitration after two years without agreement. The authorities are the Minister of Finance and HMRC |
Read Article 23 before building a structure around the treaty. A Cyprus company formed so that a UK owner reaches Articles 10 to 12 is an arrangement whose purpose the authorities can examine.
What we do not advise
We write about the Cyprus side of the treaty only. How HMRC applies the convention, which UK reliefs an owner can claim, the UK tax return, UK reporting and how the UK classifies a Cyprus company are for your own UK adviser.
The sources list the HMRC pages on gov.uk where those questions start. We opened them and do not interpret them. A UK resident who plans a Cyprus company finds the Cyprus steps in a Cyprus company for UK residents.
