Cyprus and Russia agree to amend Double Tax Treaty

14 Aug Cyprus and Russia agree to amend Double Tax Treaty

On 10 August 2020 Cyprus and Russia have agreed on an amendment of the existing provisions of the Cyprus-Russia tax treaty.

According to the agreement reached, the existing withholding tax (WHT) rates on dividend and interest payments made from Russia to Cyprus will increase to 15% subject to certain exceptions noted below.

A 5% WHT should apply, where the recipient/beneficial owner of a dividend is:
-a regulated entity such as a pension fund or insurance undertaking;
-a company the shares of which are listed on a registered stock exchange (subject to conditions);
-the Government or a political subdivision or a local authority;
-the Central Bank.

No WHT shall apply on interest payments if the beneficial owner is:
-an insurance undertaking or a pension fund;
-the Government or a political subdivision or a local authority;
-the Central Bank;
-a banking institution.

In addition, no WHT shall apply in respect of interest earned on the following listed bonds:
-corporate bonds;
-government bonds and
-eurobonds.

Finally, where the beneficial owner of the interest is a company whose shares are listed on a registered stock exchange (subject to conditions), the WHT shall not exceed 5%.

The nil WHT on royalty payments from Russia to Cyprus will not change.

Effective date
The goal of both parties is to sign the Agreement by Autumn 2020 and it will be implemented on January 1, 2021.

The Russian side has confirmed that the same provisions will also apply to agreements that Russia has concluded with other treaty partners and with effective date also being January 1, 2021, as this reflects Russia’s fiscal and tax policy to raise Government revenues.

Our services
We can assist in the evaluation of a current structure to assess any impact of the implementation of the new protocol and advice on the setup of a new structure.