Following our recent announcement, on the 03rd of August, 2020, the Russian Ministry of Finance announced its intention to initiate the process of reviewing and amending the provisions of the Double Taxation Treaty (“DTT”) with the Republic of Cyprus (“Cyprus”), as part of the main measures being taken to tackle coronavirus in the Russian Federation. The new DTT will be signed in September 2020 and shall be set in effect by January 2021.
Such reviews of DTTs are anticipated to take place additionally with Malta, Luxembourg, Switzerland, and the Netherlands in the nearest future. Cyprus is prepared to negotiate the amendments on the 10th and 11th of August, 2020 for exceptions, while Russia clearly stated that if any foreign Country does not co-operate, it will unilaterally withdraw and terminate the relevant DTTs.
Which are the “proposed” changes precisely?
a) Increase of the dividend income from 5% or 10% (subject to conditions) to 15%, and
b) Increase on interest income from 0% to 15%.
a) The Companies that are expected to be affected by these changes are those which hold patents and trademarks, transferring royalties under Licensing Agreements, along with holding Companies and financial services Companies that offer interest on investments.
b) The proposed measures are expected to weaken the national economy of Cyprus by the loss of substantial tax revenues and the withdrawal of enormous financial resources of Russian origin.
c) The Russian businessmen in Cyprus will be directly affected, having three (3) options to follow:
1. To relocate their Cyprus Companies to other European countries;
2. To relocate their Cyprus Companies back to Russia;
3. To stay in Cyprus, absorbing the increased taxation.
How can we assist you?
If your Company is affected by the new changes, please contact us in order to discuss possible restructuring of your business’ planning.