25th January 2018
In a bid to strengthen ties between the two countries, clampdown on tax evasion and bolster its position as a global business centre, Cyprus has signed a Double Tax Avoidance Agreement (DTAA) with Saudi Arabia. This landmark deal took place during a historic visit by the Cypriot President to the Arab state earlier this month.
DTAA: The details
Based on the OECD’s Model Tax convention, this treaty will apply to income taxes and revenue from the alienation of property in both locations. For Cypriot contractors seeking opportunities in Saudi Arabia and vice versa, this news will certainly be welcomed as it removes the chances of paying taxes in both locations. However, there are a few additional pieces of information from the agreement that recruiters need to be aware of when working on contract placements in either country:
- Directors’ fees: Any Director’s fees paid to a resident of a contracting state for their position as a board member of a company located in the other state may be subject to taxes in the latter location.
- Capital Gains Tax: Any gains from ‘immovable property’ will be taxed in the country in which it is located
- Permanent Establishment: The double tax treaty is relevant to permanent establishments, which, in this case, is defined as a fixed place through which the business of an enterprise is wholly or partly carried out on. Any building site, construction or installation project constitutes a permanent establishment only if it lasts more than 6 months.
- Royalties: Any recipient of royalties who is the beneficial owner of the income will be subject to a withholding tax of 8%. If the royalties are paid for the use of industrial, commercial of scientific equipment, this drops to 5%.
International employment arena evolving
As global authorities seek to evolve treaties and agreements in a world where contracting overseas is becoming increasingly popular, moves such as this can certainly be expected. The world of international employment is changing and it’s happening fast. While recruitment firms and the contractors they place might welcome the introduction of DTAA’s, staying ahead of such changes across borders will certainly be time consuming.
As the risks associated with non-compliance of international taxes increases for firms and individuals alike, recruiters should seek expert advice when placing individuals across borders. At 6CATS International we have some of the most experienced professionals in the sector with a wealth of knowledge to draw on and can advise on most countries around the world. Why not speak to us today?
Live chat with one of our expert staff
Learn more about the latest international tax news on our blog