In April we informed on our blog about the planned changes to the Double Tax Treaty between Russia and Cyprus. After months of tensions between the governments and threads of terminating the agreement, the treaty has been finally preserved.
The deal is keeping the amendments demanded by Moscow: a 15% tax on the income paid in dividends and interest from the territory of the Russian Federation to the Cyprus Republic. This provision seemed to be unavoidable from the beginning.
As a compromise, the Cyprus government secured exemption from withholding tax for pensions funds, insurance companies as well as Cypriot listed companies with a percentage of free-float shares and a percentage of direct ownership in Russian subsidiaries. Bond interest payments from the government and corporations were also exempted.
The governments are expecting to sign the agreement this autumn, which means the amendments to the avoidance of Double Taxation between the two countries should be effective as of January 2021. Until then, the beneficiaries of the outgoing tax allowances have time to adjust their tax planning accordingly.