The first-ever concluded Double Tax Treaty between Cyprus and the Hashemite Kingdom of Jordan (the "Treaty") entered into force on April 11, 2022, according to the Cyprus Ministry of Finance website.

The Treaty, which was signed on December 17, 2021, will take effect on January 1, 2023.

In summary

Cyprus ratified the first-ever concluded Double Tax Treaty with the Hashemite Kingdom of Jordan (the "Treaty") on December 31, 2021.

The Treaty was signed on December 17, 2021, and it is based on both the United Nations Model Double Taxation Convention and the OECD Model Tax Convention on Income and Capital, as announced by the Ministry of Finance of Cyprus on that day. The Base Erosion and Profit Shifting ("BEPS") minimum standards are incorporated into the Treaty.

The Treaty will enter into force in the year following the completion of the ratification process in the Hashemite Kingdom of Jordan. If the ratification process is completed this year, the Treaty is expected to go into effect on January 1st, 2023.

The following is a summary of the DTT's main provisions:

Dividends

A 5% withholding tax applies if the dividend recipient/beneficial owner is a corporation or company (other than a partnership) that directly owns at least 10% of the capital of the paying corporation or company.

In all other cases, a 10% withholding tax applies.

Interest

If the recipient/beneficial owner of the interest is the National Bank or Government or a political subdivision or a local authority, a 0% withholding tax applies.

In all other cases, a 5% withholding tax applies.

Royalties or fees for technical services

The recipient/beneficial owner of the royalty / fee for technical services is subject to a 7% withholding tax.

Capital gains

Gains derived by a Contracting State resident from the alienation of shares in a company derived more than 50 percent of their value directly from an immovable property located in the other Contracting State, and just those gains attributable to the immovable property, are to be taxed in that particular other State.

The alienation of shares listed on an approved stock exchange is exempt.

Gains that are derived by a Contracting State resident from the alienation of shares in a corporation whose value or a greater part of its value is derived indirectly or directly from exploitation or exploration rights; or from property located in the other Contracting State and utilized in the exploitation or exploration of the subsoil or seabed or their natural resources located in the other State; or from such property and such rights are taken together, may get taxed in that other State.

Entitlement to benefits

An advantage under this Treaty shall not be granted concerning an item of income if, having regard to all relevant circumstances and facts, it is reasonable to conclude that getting that benefit was one of the principal purposes (Principal Purpose Test) of the transaction arrangement that resulted indirectly or directly in that benefit.

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