The United States–Cyprus Income Tax Treaty was established to eliminate double taxation and promote cross-border trade and investment between the two nations. This treaty outlines how income, profits, and capital gains are taxed when earned by residents or entities operating in both the U.S. and Cyprus, ensuring fair and equitable tax treatment.

At Z Tax & Accounting, our international tax professionals help individuals and businesses apply the benefits of the U.S.–Cyprus Tax Treaty to minimize global tax exposure and maintain full compliance with both U.S. and Cypriot tax authorities.

Key Provisions of the U.S.–Cyprus Tax Treaty

1. Elimination of Double Taxation
   The treaty provides mechanisms such as foreign tax credits and exemptions to prevent the same income from being taxed twice. U.S. taxpayers may claim credits for taxes paid to Cyprus, reducing their overall liability.
   
   

2. Residency Rules
   Residency determines which country has the primary right to tax. The treaty includes “tie-breaker” provisions based on factors such as permanent home, center of vital interests, and habitual abode to resolve dual-residency situations.
   
   

3. Business Profits and Permanent Establishment (PE)
   Profits from a business are taxed only in the country where the enterprise has a Permanent Establishment—such as an office, branch, or factory. If no PE exists, income is taxed solely in the taxpayer’s country of residence.
   
   

4. Dividends, Interest, and Royalties
   
   

   • Dividends: Taxed at reduced rates (typically 5%–15%) depending on ownership thresholds.
     
     

   • Interest: Generally exempt or taxed at a lower rate in the source country.
     
     

   • Royalties: Usually taxed at reduced or zero rates under the treaty.
     These reductions encourage cross-border investment and technology exchange.
     
     

5. Independent and Dependent Personal Services
   Income from employment or self-employment is taxed in the country where the work is performed unless the individual spends only a limited time there and the employer is not a resident of that country.
   
   

6. Pensions and Social Security Payments
   Pensions and similar remuneration are generally taxed only in the recipient’s country of residence, preventing double taxation on retirement income.
   
   

7. Capital Gains
   Capital gains are typically taxable only in the country of residence, except for gains from real property or assets forming part of a permanent establishment in the other country.
   
   

8. Exchange of Information and Anti-Avoidance
   The treaty facilitates cooperation between the U.S. Internal Revenue Service (IRS) and the Tax Department of Cyprus to share relevant tax information, promote transparency, and prevent tax evasion.
   
   

Treaty Benefits for Individuals

• Avoid double taxation on wages, dividends, pensions, and investments.
  
  

• Benefit from reduced withholding tax rates on cross-border income.
  
  

• Clarify residency for tax purposes under treaty rules.
  
  

• Access exemptions or credits for income taxed in both countries.
  
  

• Ensure compliance with both IRS and Cypriot authorities.
  
  

Treaty Benefits for Businesses

• Avoid double taxation on profits from U.S.–Cyprus operations.
  
  

• Determine Permanent Establishment status to reduce exposure.
  
  

• Access lower withholding tax rates on dividends, interest, and royalties.
  
  

• Structure cross-border transactions efficiently for tax savings.
  
  

• Gain legal certainty under internationally recognized tax principles.
  
  

Z Tax & Accounting – Experts in U.S.–Cyprus Tax Treaty Applications

At Z Tax & Accounting, we provide full-service support for individuals and businesses impacted by the United States–Cyprus Tax Treaty. Our international tax experts and enrolled agents assist with:

• Treaty-based return positions and compliance
  
  

• Cross-border tax planning and reporting
  
  

• Residency and foreign tax credit analysis
  
  

• Business structuring for multinational operations
  
  

• IRS and foreign tax authority correspondence
  
  

Whether you are a U.S. resident with income from Cyprus or a Cypriot investor operating in the United States, Z Tax & Accounting ensures that your filings are accurate, compliant, and optimized under the treaty’s provisions.

Contact Z Tax & Accounting

For professional assistance with U.S.–Cyprus tax treaty benefits, contact Z Tax & Accounting today.
Our team provides strategic tax solutions for global individuals and corporations seeking to minimize tax liabilities under international tax treaties.

📞 Phone:  (214)  699-4790
📍 Office: 600 E John Carpenter Freeway, Suite 268, Irving, TX 75062

Z Tax & Accounting — Trusted Experts in International and Cross-Border Taxation

The above Summary may not include specifics about individual taxpayer's specific situation and is for general information. Contact us directly to discuss your situation. The link to the actual Tax treaty is as under: