On May 13 2015, during the 24th annual meeting of the European Bank for Reconstruction and Development (EBRD) in Tbilisi, Georgia and Cyprus signed an agreement for the avoidance of double tax payment (double tax treaty).
The agreement signed by Cyprus and Georgia is harmonised with the OECD Model Tax Convention with some modifications. In particular, any building site or construction or installation project, or any supervisory activities in connection with such site or project will now only constitute a permanent establishment if it lasts more than nine months.
Moreover, the withholding tax rate for dividends is set at 0% of the gross amount and withholding tax on interest is also zero-rated, as is withholding tax on royalties.
Capital gains derived by a resident of a contracting state from the disposal of immovable property situated in the other contracting state may be taxed in that other state.
Capital gains that arise by a resident of a contracting state from the disposal of shares in a company are to be taxed only in the contracting state where the alienator is resident.
The agreement has been signed in order to strengthen the economic relations between the two countries, to eliminate the fiscal evasion with respect to taxes on income and on capital and in order to attract investments in both countries.
The treaty was published in the Official Gazette of the Republic of Cyprus on May 29 2015 and will enter into force on January 1 2016, provided that Cyprus and Georgia confirm that their formal ratification procedures have been completed.
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