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On the 10th of August there was a meeting in Moscow where there has been an agreement on the Cyprus Russia Double Tax Treaty (DTT), and the revised protocol was signed on the 8th of September 2020.
As a result, the process for the unilateral revocation of the treaty by the Russian Federation ceases and a period of uncertainty, following the request on 1 April by the Russian Federation to amend the Cyprus Russia DTT, ends.
As of 1 January 2021, the withholding tax on dividends and interest paid from Russia to Cyprus will increase to 15% with certain exemptions, regarding regulated entities and certain types of interest on corporate bonds, government bonds and Eurobonds. More details of these exceptions will be communicated by the Cyprus Russian Business Association soon.
The Cyprus Russian Business Association’s understanding is that similar request letters, for an increase of withholding tax rates on dividends and interest to 15%, have been sent to Malta, Luxembourg and the Netherlands and will be sent to other countries as well. This creates the potential for a level playing field. The intention of the Russian side is for changes in the treaties with all countries to be effective as of 1 January 2021.
The position of the Association from the start was that it should continue to have in place an effective DTT with the Russian Federation and that Cyprus should not find itself at a disadvantage compared to other European countries.
The conclusion of the matter broadly satisfies these objectives.
The Association was represented, as part of the official delegation, at the meeting in Moscow and was involved in the negotiations effort throughout this period.