Cyprus has signed a new double tax agreement with Iceland at the Embassy of Cyprus in Stockholm.

The tax agreement aims to boost trade and economic relations between the two countries.

The pact was based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital.

The Cyprus Investment Promotion Agency said: "Updating, maintaining existing, and signing new double taxation treaties is part of the drive to enhance and attract foreign investments, as well as of promoting Cyprus as an international business hub."

The agreement will limit the withholding tax on dividends income at source to 5%, if the recipient owns at least 10% of the company paying the dividend.

In addition, the accord will also cap the rate on royalties and interest income at 5% and also applies the deduction method (credit method) to avoid double taxation.

Till date, Cyprus has signed double taxation agreements with more than 50 countries.