On January 3, 2018, the “Convention for the Avoidance of Double Taxation with respect to Taxes on Income and for the Prevention of Tax Evasion between the Republic of Cyprus and the Kingdom of Saudi Arabia” or the Cyprus-Saudi Arabia Tax Treaty was signed in Riyadh, Saudi Arabia.
The Cyprus-Saudi Arabia Tax Treaty was signed during the official visit of the President of Cyprus to Saudi Arabia. On behalf of Cyprus, the treaty was signed by Mr. Ioannis Kasoulides, Minister of Foreign Affairs of the Republic of Cyprus. On behalf of the Kingdom of Saudi Arabia, the treaty was signed by Mr. Mohammad Abdullah Al-Jadaan, Minister of Finance of Saudi Arabia.
Cyprus authorities have stated that the Cyprus-Saudi Arabia Tax Treaty is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital, and it includes the exchange of financial and other information in accordance with the relevant Article of the Model Convention.
The signing of the Cyprus-Saudi Arabia Tax Treaty comes at a very special time for Saudi Arabia as another eleven princes were arrested. It should be remembered that there were numerous arrests for corruption in November of 2017.
The signing of the Cyprus-Saudi Arabia Tax Treaty will strengthen the treaty networks of both countries. The exchange of information will also help Saudi Arabia to exercise better control the flow of funds from Saudi Arabia to Cyprus.
Moreover, the exchange of information between Saudi Arabia and Cyprus may also inadvertently lead to this information being turned over to the IRS through FATCA (i.e. this information may be disclosed to the IRS by Cyprus or any other FATCA-compliant country that obtains it from Cyprus through another exchange of information arrangement). Hence, there is an increased potential of the IRS discovery of noncompliance with US international tax provisions by Saudi Arabian citizens who are also US tax residents.
It should be noted that the Cyprus-Saudi Arabia Tax Treaty was only signed and it has not yet been ratified by either country.
Sherayzen Law Office will continue to monitor new developments with respect to the Treaty.