In summary

The Cyprus Tax Authority released a circular (Circular 2/2022) on February 2, 2022, advising both jurisdictions that the legal procedures for the entrance into effect of the Cyprus – Germany Double Tax Treaty Protocol signed on February 19, 2021 (the "Protocol") had been completed.

The Protocol becomes effective on January 1, 2022, after entering into force on December 8, 2021.

The Protocol amends the Cyprus–Germany Double Tax Treaty (2011) (the "Treaty") by introducing Base Erosion and Profit Shifting ("BEPS") minimum requirements and amending Article 7 "Business Profits" in accordance with the OECD Model Tax Convention (2017).Below is a summary of the main amendments to the Treaty effected by the Protocol:


The prologue has been changed to highlight the Contracting States' intention for the Treaty not to allow for non-taxation or reduced taxation through tax evasion or avoidance (e.g. through treaty-shopping arrangements).

Business Profits

The OECD Model Tax Convention has been incorporated into Article 7 "Business Profits" (2017). This Article assigns taxing rights to business earnings of a Contracting State's enterprise to the extent that these profits are not subject to alternative regulations under other Treaty Articles.

It incorporates the principle that unless a Contracting State's enterprise has a permanent establishment in the other State, that enterprise's business profits may not be taxed by that other State unless those profits fall into special categories of income for which other Articles of the Treaty grant those other State taxing rights. 

Entitlement to benefits

A advantage under this Convention will not be conferred in respect of an item of income if it is possible to infer, having regard to all the circumstances facts and circumstances, that obtaining that benefit was one of the principal purposes (Principal Purpose Test) of the arrangement or transaction that resulted directly or indirectly in that benefit.

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