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The Republic of Cyprus and the Russian Federation have initialled an agreement to avoid double taxation between the two countries, thus removing Cyprus from the Russian tax black-list.
The relevant protocol was signed in Nicosia by Cypriot Minister of Finance Charilaos Stavrakis and Director of the Department of Tax and Customs Tariffs Policy at the Russian Ministry of Finance Ilya Trunin, who both expressed satisfaction that the tough negotiations had led to this agreement.
''There was pressure from the Russian authorities for a renegotiation of this treaty for the last four or five years and we have started extensive negotiations, we have been to Moscow on five occasions, where we met with the Russian Minister of Finance and the rest of the delegation. Our friends came to Cyprus on a number of occasions,'' he added.
Stavrakis explained that the breakthrough was achieved after Cyprus passed legislation last May facilitating the exchange of information between the authorities of the two nations.
''Cyprus maintains its competitive position as a very important country through which investments are made in Russia, and Russia, on its part, has got a significant number of concessions they were asking for,'' he added.
The Minister noted that ''once there is the full formal agreement, Cyprus will be removed from the so-called blacklist.''
He also said that each country will now take the necessary steps to formally ratify the agreement and that ''we can safely say that what remains is much easier.''
Stavrakis said that ''basically the very low and competitive factors Russians are enjoying today concerning investments through Cyprus, as well as the foreign investors in Russia, are being maintained, so we probably have the most competitive factors in the world.''
He added that the new agreement ''establishes Cyprus' position as a high specification centre for attracting investments.''
Trunin said that ''it was indeed a very tough and long negotiation between our two countries on the agreement on double taxation.''
''The result of these negotiations is beneficial for both countries. I would say that on the one hand the agreement that we achieved on the technical level on the double taxation agreement will allow Russia and Cyprus, and residents of Russia and Cyprus and other taxpayers, not to use the agreement in an inappropriate way, and on the other hand will enable the Russian Federation to remove Cyprus from the so-called blacklist, although it is not a blacklist, it is a list of offshore jurisdictions, where Cyprus unfortunately is present now in Russia,'' he said.
Russian properties holdings to be taxed
The main and principle difference that will apply once the new agreement is ratified is that after five years, the capital gains tax on Russia property holdings will be taxed in Russia, at the prevailing rates there.
This means in five years, the profit made on the shares of Russian subsidiaries of Cyprus holding companies who will have more than 50% of their assets in property in Russia will be taxed in Russia, on the tax rate applicable in Russia, something that at the moment does not exist.
