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Russia and Cyprus Agree to Amend the Tax Agreement
September 8, 2020 16:05

Russia and Cyprus signed a protocol to amend the tax agreement. Countries agree to raise base tax rate on dividends and interest to 15%.

On September 8, Russia and Cyprus signed a protocol on amending the intergovernmental agreement on the avoidance of double taxation (DTT) in relation to taxes on income and capital. This was reported by the press service of the Russian Ministry of Finance.

On the Russian side, the document was signed by the State Secretary - Deputy Minister of Finance Alexei Sazanov, and on the side of Cyprus - by the Minister of Finance of the Republic Konstantinos Petridis. The provisions of the agreement should take effect from January 1, 2021. For this, the protocol must be ratified by the end of 2020, the Russian Ministry of Finance specifies.

In the signed protocol, the parties have identified a list of exceptions. Previously, the tax on dividend payments in favor of Cyprus residents from Russia could be reduced to 5% or 10%, and on interest on loans - to 0%. The amendments provide for the possibility of preferential taxation of income in the form of dividends and no more than 5% at the rate. Institutional investors, as well as public companies with at least 15% of their shares in free float and owning at least 15% of the capital of the company paying the income during the year, can count on the privilege. The protocol also states that the new rules will not affect income in the form of interest paid on Eurobond loans, bonded loans of Russian companies and loans provided by foreign banks.

The Ministry of Finance explained that similar changes will be made to tax agreements with other jurisdictions. In particular, this has already been agreed with Malta and Luxembourg. In addition, the department is in talks with the Netherlands. In total, according to the Federal Tax Service (FTS), Russia has such agreements with 80 countries.

At the end of March this year, Russian President Vladimir Putin proposed taxing 15% on dividend income transferred to accounts abroad. This required adjusting agreements with other countries to avoid double taxation. The Ministry of Finance held talks with Cyprus, during which the authorities of this country put forward their requirements. The authorities of the republic did not agree to accept the offer of the Ministry of Finance and in early August the department announced that Russia would break the agreement on the avoidance of double taxation. A week later, new negotiations took place, during which Cyprus nevertheless agreed to the conditions of Russia.

Author: Anna Dorozhkina

Tags: Russia International Russian Laws    

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