Slovenia-Cyprus Double Taxation Agreement

On 12th of October 2010 the President of Slovenia met with Cypriot government representatives in Cyprus to sign a new convention for the avoidance of double taxation between the two countries (the 'Convention'). The signature of this Agreement is part of a drive to make Cyprus a more attractive jurisdiction for international business as well as to maintain and empower healthy economic and commercial relations with other countries. The treaty in force since 1986 was that between Cyprus and the Socialist Federal Republic of Yugoslavia, however this ceased to apply on 1st January 2011.The new Agreement chiefly reflects its predecessor, however a few amendments are to be noted. Withholding rates on dividends and interest have been reduced from 10% to 5%, stimulating further investments between the two jurisdictions, yet the 5% rate of withholding tax on royalties has remained unchanged. Dividends, interests and royalties are thus Further, he provisions on the exchange of information in the 1985 Agreement have been revised with wording almost identical to article 26 of the latest OECD Model Treaty. Under this provision, the jurisdiction requesting information may ask for a confirmation of identity of a person under investigation as a beneficial owner of a company but may not inquire as to the identity of a beneficial owner of a particular company without having submitted identification. In other words, therefore, the provision may not be used as a basis for fishing expeditions. This position reflects local Cypriot law.This agreement is critical for Cyprus particularly due to the fact that Slovenia is an EU member state and a Mediterranean country, offering access to the Balkan region and Central Europe. Through the Agreement, Slovenian business may benefit from the Cypriot corporate tax regime and from investment opportunities available both in and through Cyprus. Apart from the commendable standard of business services available in Cyprus, its strategic geographical location makes Cyprus, an EU member state itself, a gateway to the Middle East and Northern Africa.