Tax News: 16/2020

Cyprus and Russia have finally reached an agreement for amending the Cyprus-Russia Double Tax Treaty (‘DTT’). The relevant protocol was agreed between the competent authorities of the two countries on 10 August 2020.
According to the press release of the Minister of Economics of Cyprus, the Russian side has requested the amendment in two key elements of the Agreement, namely the increase of the withholding tax on income from dividends and interest to 15% respectively.
The Cyprus side secured, among others, the reduction of the said withholding tax (to nil or 5% as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. Additionally, exemption from the said withholding tax applies on interest payments from corporate bonds, government bonds and Eurobonds. The Cypriot side has also secured the maintaining of zero withholding tax (0%) on royalty payments.
The intention of both sides is for the Agreement to be signed in Autumn 2020 so as to apply as from January 1, 2021.
The Russian side has confirmed the termination of the process to denounce the Agreement. At the same time, it 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.