The commercial and financial relations between Cyprus and The Kingdom of Norway (“Norway”) have been governed by the 1951 DTAA between Norway and the United Kingdom which was extended in 1955 to include several British colonies, including Cyprus.  Given the continuously increased economic activities between the two countries a new DTAA was signed on 24 February 2014 and will come into force once the respective internal ratification procedures have been completed.

The treaty sign off was well received by the business communities of the two countries and it further enhances Cyprus position as an international business center, since some of its provisions are deemed to be significantly favorable. The DTAA’s main provisions are analyzed below:

Permanent Establishment

Based on the new treaty the definition of permanent establishment also includes a building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 12 months (definition in compliance with OECD model).

Dividends

In cases where the beneficial owner of the dividend is a company, which owns at least 10% of the shares of the company paying the dividend, the withholding tax rate is set at 0%.  In all other cases the withholding tax rate is 15%.

Interest

The withholding tax rate on interest is set at 0%.

Royalties

The withholding tax rate on royalties is set at 0% (e.g. for patents, trademarks, copyrights, secret formulas/processes relating to scientific, commercial and industrial experience, artistic or scientific work including films).

Gains

Gains from the disposal of immovable property are taxed in the country where the immovable property is situated.

Important note

The DTAA rates are deemed very favorable for international investment flows through Cyprus, given that dividend income and gain from the disposal of shares are exempted from income and any other taxation in the island.

Limitation of benefits clause

The DTAA does not include a limitation of benefits clause.

The DTAA will enter into effect on 1 January following the year in which the parties exchange notifications of ratification.