A treaty for avoidance of double taxation (the “Treaty”) between Cyprus and Jordan was signed on 17 December 2021 and was published in the Official Gazette on 31 December 2021. The Treaty entered into force on 11 April 2022 and its provisions will enter into effect as from 1 January 2023. 

The Treaty is grounded in the most recent version of the OECD Model Convention, designed to prevent double taxation. It incorporates the latest standards regarding information exchange, mutual agreement procedures, the principal purpose test, and takes into full account the recommendations of the BEPS action plan. 

Primary provisions of the Treaty: 

Dividends: A 5% withholding tax applies when the recipient company directly owns at least 10% of the dividend-paying company’s capital. In all other cases, a 10% withholding tax is imposed. 

Interest: There is a 5% withholding tax on interest income, provided that the recipient is the true owner of the interest. However, if the recipient is the Government, a political subdivision, a local authority, or the National Bank of the other Contracting State, no withholding tax is applied (0% withholding tax). 

Royalties and fees for technical services: A 7% withholding tax applies to royalties and fees for technical services, assuming that the recipient is the rightful owner of these payments. 

Gains from the sale of shares in property-rich companies: If a resident of one Contracting State sells shares in companies primarily valued from immovable property located in the other Contracting State, only the gains related to that immovable property may be subject to taxation in the other State. 

Gains from the sale of shares in companies related to exploration or exploitation rights: If a resident of one Contracting State sells shares in companies predominantly deriving their value from exploration or exploitation rights, or property used for seabed or subsoil exploration or exploitation in the other Contracting State, or a combination of these, the gains may be taxed in the other State. 

The Treaty aligns with the latest OECD guidelines to prevent double taxation and specifies the taxation rates for dividends, interest, royalties, and certain types of capital gains in the respective Contracting States. 

For comprehensive details about our services, please reach out to our dedicated team either via email at [email protected] or by calling us at +357 22 023000.