On 10 August 2020, and following extensive negotiations, the Cypriot Ministry of Finance announced the completion of the amendment of the double tax treaty (DTT) between the Republic of Cyprus and the Russian Federation.
The amended DTT increases the withholding tax on income from dividends and interest on Russian companies based in Cyprus from 5% and 0% respectively to 15% in order to stimulate Russia's public revenue.
The existing rates continue to apply to certain regulated entities such as pension funds and insurance companies, as well as listed companies with a specific stock rating. In addition, interest payments from corporate and government bonds as well as Eurobonds are excluded from the withholding tax.
Both parties have the intention to sign the above agreement by Autumn 2020 in order to be implemented on 1 January 2021.
Notably, the Russian Federation assured the withdrawal of the termination procedures of the DTT with the Republic of Cyprus that were initiated on 3 August 2020. Simultaneously, the Russian Federation renegotiates with other EU countries with favorable withholding tax rates.
The author of the article is Michalis Parides.
Michalis is a junior legal consultant at Royal Pine & Associates. He is a holder of an LL.B from the University of Essex and an LL.M from the University of Leeds.
* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render legal advice.