Amending Protocol of Double Tax Treaty between Cyprus and Germany

On 5 March 2021 Cyprus ratified the amending protocol to the Double Taxation Avoidance Agreement (DTAA) as signed with Germany on 19 February 2021. The provisions of the protocol will be in force as soon as all relevant legal proceedings are completed.

The protocol affects minimum standards of the Base Erosion and Profit Shifting (BEPS) actions of the Organization for Economic Co-operation and Development (OECD), together with other areas as described below:

Newly introduced preamble of DTAA

The preamble specifies that the DTAA intends to eliminate double taxation with respect to the taxes covered by this Agreement without creating opportunities for non-taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this agreement for the indirect benefit of residents of third States).

Business profits

Article 7 of the DTAA was amended to be in line with the respective wording in the 2017 OECD Model Tax Convention and away from the UN Model Tax Convention.

With this article, taxing rights are allocated with respect to the business profits of an enterprise of a Contracting State to the extent that these profits are not subject to different rules under other Articles of the DTAA.

Entitlement to benefits

Article 27 was introduced, that deals with the application of the DTAA in special cases. Specifically, the treaty implements the Principal Purpose Test (PPT) in response to the BEPS Action 6 - Prevention of tax treaty abuse.

Based on the above article, no benefit would be granted to the taxpayer under this agreement, 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 this DTAA.

Exchange of information

Subparagraph 5.4 of paragraph 5 of the protocol to the treaty was deleted from the treaty. This paragraph obliged contracting states to provide information regarding personal data upon request of the other state, in cases where the requested contracting state does not need such information for its own tax purposes.


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