A zero will be hereinafter referred to as the tax for dividends that Greek taxpayers receive from companies with headquarters in the… Cyprus. This emerges from a document of the Directorate of International Economic Relations (TEC), which interprets the convention for the avoidance of double taxation between Greece and Cyprus in respect of dividends and credit of the cyprus tax against the Greek.
Essentially, these clarifications provided by the document lead to the elimination of the tax that they pay today Greek taxpayers for dividends received from companies based in Cyprus.
What’s the difference
In particular, as he explains Nikos ΣιακαντάÏης Managing Partner of the company Unity Four, in accordance with the provisions of the convention for the avoidance of double taxation between Greece and Cyprus, and in the case of a regular dividend, in order to calculate the tax burden of such dividend in Greece will be taken into account:
– except for any withholding tax paid in Cyprus and
– the cypriot tax paid by the company in Cyprus in respect of the profits, which is formed in 12.5%.
What this means, given that in Cyprus, the withholding tax of dividends is nil?
Whether or not that company – ‘resident’ of Cyprus has taxable profits of 100,000 euros. You will have to pay eur 12,500, an amount that corresponds to the corporate income tax in Cyprus is 12,5%. Then, the company decides the dividend distribution of € 25,000 euros to a tax resident of Greece. What tax you pay, the Greek μεÏισματοÏχος, given that the tax withholding of the dividend in Cyprus is 0%; In accordance with article 64 of law. 4172/2013, the withholding tax on foreign dividends is 10%. Therefore, you will need to submit a declaration of income tax to pay the Tax of 2,500 euros (25,000 X 10%).
However, this changes for the benefit of the Greeks shareholders in cypriot companies. And that’s because, according to the document of the Directorate of International Economic Relations, for the credit of tax in Greece should be taken into account and the income tax on the profits of the company in Cyprus, i.e. 12.5%. This, therefore, means that for the alien this dividend, in the present case of the cypriot company, the Greek taxpayer will pay, no longer, a zero tax rate. The reason for it? The income tax in Cyprus-which will be hereinafter referred to as the account on the basis of the circular – exceed by 2.5% of the corresponding tax on dividends Greek law (Law. 4172/2013). So the tax becomes zero.
What would happen if finalized, the anticipated increase of withholding tax on dividends from 10% to 15%; In this case, the final tax liability for tax resident in Greece who receives dividends from a company established in Cyprus will rise to 2.5% (15-12,5%).
The increase in the tax on dividends
“The international tax framework and the rules governing it are not as simple as some people want to show them, considering that with a simple increase in the retention rate of dividends will be possible, and the increase of tax revenue. The international tax framework is governed by rules that are the same our country through bilateral contracts is committed to maintain and that make the possibilities of unilateral moves quite difficult,” notes mr. ΣιακαντάÏης.
With regard to the imminent increase in the withholding tax on dividends does not concern in any case of dividends paid to foreign companies established in countries of the European Union which is exempt the basis of a community directive by the withholding tax as well as companies or natural persons established in a country that Greece has signed a bilateral convention for the avoidance of double taxation and in which it is specified that the withholding tax has as upper limit the rate specified by the relevant contract” ends.
Source
Zeroed the tax on dividends from cypriot companies
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