On 10 August 2020, The Cyprus Ministry of Finance announced the conclusion of extensive negotiations on the Agreement for the avoidance of Double Taxation between the Republic of Cyprus and the Russian Federation. 

The Cyprus side secured, among others, reduction of a withholding tax (WT) proposed earlier in the negotiations (to nil or 5 per cent as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. In addition, exemption from WT applies on interest payments from corporate bonds, government bonds and Eurobonds. The Cypriot side also secured the maintaining of zero WT on royalty payments. The treaty can be utilised by all other types of Cyprus based entities with an increase of the WT on income from dividends and interest to 15 per cent respectively. 

Both sides concurred the Agreement to be signed in Autumn 2020 in order to apply as from 1 January 2021. 

The Russian side has confirmed that moving forward they would discontinue any actions aimed at terminating the treaty and that they would seek the same provisions with other countries with effective date also being January 2021, as this reflects Russia’s fiscal and tax policy to raise Government revenues. 

The official announcement can be found here.

This blog was co-authored by Theodoros Assiotis.