DOUBLE TAX TREATIES

In this age of globalization  many organizations including individuals have got their wings spread all over the world.

In any country the tax is levied based on

  • Source Rule and
  • the Residence Rule.

The source rule holds that income is to be taxed in the country in which it originates irrespective of whether the income accrues to a resident or a non-resident whereas the residence rule stipulates that the power to tax should rest with the country in which the taxpayer resides.

If both rules apply simultaneously to a business entity and it were to suffer tax at both ends, the cost of operating on an international scale would become prohibitive and would deter the process of globalisation.

It is from this point of view that Double Taxation Avoidance Agreements (DTAA) becomes very significant.

The main purpose of Double Taxation Treaties is to avoid the International Double Taxation when the same profits of a legal person or of an individual are taxed in two or more countries.

This is also the major reason why the treaties constitute an important tool for International Tax Planning and give important advantage to the countries which sign such Treaties.

Cyprus has completed over 50  Double Taxation Treaties up to today and is also in negotiations with many countries for signing Treaties with them.

Get in touch with our tax partner to find out more about your specific circumstances.

For more information about double tax treaties please download our TAX FACTS sheet.

 

Important note: This article has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice from a qualified accountant.

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