On the 10th of August 2020, Cyprus and Russia have agreed on a revised Double Tax Treaty (DTT), that is expected to become effective on the 1st of January 2021.
The revised DTT, most importantly raises the withholding tax rate for dividends and interest paid out from Russia to 15%. However, interest payments from Corporate and Government Bonds as well as Eurobonds are excluded from the 15% withholding tax. In addition, dividends received from regulated entities, such as pension funds, insurance companies and listed companies will also be exempted from the 15% withholding tax. Cyprus will provide for a tax credit on the withholding tax paid in Russia thus avoiding double taxation.
The Russian government is imposing the same tax rates with DTTs with Malta, Netherlands and Luxembourg. Therefore, it was extremely important for Cyprus to agree to the new Russian terms as a different approach would have resulted to an end of the current DTT with much worse consequences.
The swift movement of the Russian government is a result of the current economic downturn and measures to increase its revenues.
The Corona Virus pandemic has affected all economies around the as Russia’s biggest revenue sector.
The Russian government expects that the changes in the DTT will increase annual tax revenues by approximately Euro1.5 billion.
13 August 2020: Cyprus is the first Country to agree terms with Russia for a revised Double Tax Treaty
Contributed by: George Kallinicou