The DTT will enter into force once the necessary legal procedures are executed and completed between the two countries. Once the DTT comes into force, it will apply on or after the 1st of January of the year following the date the treaty enters into force.
The treaty is based on the OECD Model Tax Convention and its main provisions are outlined below:
Dividends (Article 10)
The withholding tax rate on dividends paid to the other Contracting State is 15% except in the following two cases for which no withholding taxes are imposed:
a) When dividends are paid to a company which holds directly at least 5% of the share capital of the company paying the dividends, throughout a 365-day period that includes the day of the dividend payment
or
b) When dividends are paid to a recognised pension fund which is generally exempt from Corporate or Income Tax
In all other cases the withholding tax cannot exceed 15% of the gross dividends paid.
Interest (Article 11)
There is no withholding tax provided that the recipient of the interest is the beneficial owner of the income.
Royalties (Article 12)
There is no withholding tax provided that the recipient of the royalties is the beneficial owner of the income.
Capital Gains (Article 13)
- Gains from the disposal of immovable property are taxable at the country where the property is situated.
- Gains from the disposal of movable property which is part of the ownership of a permanent establishment are taxable at the country where the permanent establishment is based.
- Gains from the disposal of ships and aircrafts used in international aviation are taxable at the country where the real seat of the owning company is situated.
- Gains arising from the disposal of shares of a company or comparable interest which derive more than 50% of their value (directly or indirectly) from immovable property, are taxable in the country where such immovable property is located. This does not apply in the following cases:
a) Shares or comparable interests which are listed in any recognised Stock Exchange
b) Shares or comparable interest which are disposed as part of a corporate reorganization
c) In cases where the immovable property out of which the value of the shares derives, comprises of immovable property out of which the activities of the company are carried out
d) Where the seller holds (directly or indirectly), by itself or via other related parties, a percentage up to 25% of the capital of the company
e) Where the seller is a recognised pension fund
This tax publication has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained herein without obtaining specific professional advice. Please contact BDO Ltd to discuss these matters in the context of your circumstances. BDO Ltd, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
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