Russia and Cyprus Signed a Protocol to Amend the Tax Agreement

Россия и Кипр подписали протокол об изменении налогового соглашения
8 September 2020 Liza Medvetskaya
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On Tuesday, September 8, Russia and Cyprus signed a protocol on amendments to the agreement on the avoidance of double taxation.

The ceremony took place as part of the visit to Nicosia of a Russian delegation led by Foreign Minister Sergei Lavrov.

On the Russian side, the document was signed by State Secretary - Deputy Finance Minister Alexei Sazanov, and on the Cyprus side - by Finance Minister Konstantinos Petridis.

The signing of the protocol guarantees the continuation of the implementation of the agreement on the avoidance of double taxation, which is undoubtedly beneficial for both parties, as it stimulates investment, trade in all sectors of the economy, as well as in the labor market, said the Minister of Finance of Cyprus after the meeting.

The protocol is expected to be ratified by the end of this year, and its provisions will come into effect on January 1, 2021.

According to the innovations, the base rate of tax on dividends and interest will increase to 15%.

As you may know earlier the tax on dividend payments in favor of residents of Cyprus from Russia could be reduced to 5 or 10%, and on interest on loans - to 0%. However, the Russian government, on behalf of President Vladimir Putin, has developed a new draft protocol to amend the tax agreement with Cyprus.

According to the Russian Ministry of Finance, during the period of the agreement with Cyprus, many Russian companies have used its jurisdiction. So, in 2018, RUB 1.4 trillion were withdrawn to the republic, and in 2019 - more than RUB 1.9 trillion. As a result, the Russian Ministry of Finance proposed to its colleagues in Cyprus to raise rates to 15% on both dividends and interest, but the negotiations were not immediately successful.

Россия и Кипр подписали протокол об изменении налогового соглашения

In response to Moscow's demand, Cyprus submitted proposals that contained various exceptions and thus was too bad for the Russian budget. After that, the Russian side proposed a compromise solution to the issue, but was refused. Nevertheless, in the end, the Cypriot government nevertheless agreed to make the indicated amendments to the treaty.

It is worth noting that the new protocol still defined a list of exceptions, according to which the application of preferential treatment will be provided for income in the form of dividends and interest at a rate of no more than 5%.

Exceptions are provided for institutional investments, as well as for public companies with at least 15% of the shares in free float and holding at least 15% of the capital of the company paying the specified income during the year. In addition, the new rules will not affect interest income paid on Eurobond loans, bonds issued by Russian companies and loans provided by foreign banks.

At the meeting, the Russian side announced that it plans to sign similar protocols soon with Malta, Luxembourg and the Netherlands.


Source: cyprus-mail.com
Photos: cyprus-mail.com, alphanews.live
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