As reported before, on 20 July 2020, an amending Protocol to the existing Double Tax Treaty (DTT) of 2014 was signed between the Republic of Cyprus and the Swiss Confederation.
The Protocol entered in to force on 3 November 2021.
As per previous newsfeeds, the Protocol introduces, among others, minimum standards of the OECD Base Erosion and Profit Shifting (BEPS) actions, including the following:
1. the incorporation of specific wording in the Preamble of the DTT
The specific wording provides that the intention of the DTT is to eliminate double taxation with respect to taxes on income and on capital, without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this convention for the indirect benefit of residents of third states).
2. the introduction of a Principal Purpose Test through the ‘Entitlement to Benefits’ Article of the DTT
A benefit based on the DTT shall not be granted in respect of an item of income or capital should this benefit be one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it can be established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provision of the DTT.
3. the introduction of specific wording in the ‘Mutual Agreement Procedure’ Article
The ‘Mutual Agreement Procedure’ Article is extended so that in case a person believes that the actions of one or both of the Contracting States result or will result in taxation imposed to him/her, which is not in accordance with the provisions of the DTT, he/she may present the case to the competent authority of either Contracting State as opposed to the competent authority of the State in which he/she is resident (as was the case before).
4. the introduction of time limitation for adjustments
A six year limitation has been introduced regarding adjustments made by the competent authorities of the two countries with respect to the attribution of profits to permanent establishments and profits from transactions between associated enterprises.
The amendments mentioned in points 1 and 2 above shall have effect from 1 January 2022, while the amendments mentioned in points 3 and 4 have effect from 3 November 2021, date on which the Protocol came in to force.
