The Cyprus-Czech Republic income tax treaty, signed on 28 April, provides for withholding tax rates that are generally lower than those stipulated by the two countries’ domestic tax laws. The treaty stipulates that dividends will be exempt from the withholding tax if the beneficial owner of the dividends is a company (other than a partnership) that directly holds at least 10 percent of the dividend payer’s capital over an uninterrupted period of at least one year.
A 5 percent withholding tax rate will apply in other cases. Interest will be taxable only in the country of residence of the beneficial owner of the interest. Royalties will be subject to a rate not to exceed 10 percent. The treaty will become effective after the parties exchange instruments of ratification. Once in force, it will replace the 1980 Cyprus-Czechoslovakia tax treaty.