Duma passes double-tax treaty, Cyprus off Russia black list

Russia is about to remove Cyprus from its “black list” of targeted tax havens, after the Duma passed a law this week to ratify the Protocol to the Double Tax treaty between the two countries.
The Protocol will enter into force upon signing of the ratifying law by President Dmitry Medvedev and after due procedural publication and notification to the Government of Cyprus which already ratified the Protocol in September 2011. The Protocol will come into effect as from January 1, 2013.
The new article concerning taxation of sale of shares in companies deriving their value primarily from the real estate will apply as from January 1, 2017, after a 4-year grace period.
“This will improve the image of Cyprus and will enable Russian companies to structure their investments in foreign ventures through Cyprus, as dividends coming to the Russian parent from a Cypriot subsidiary may be exempt from taxation (subject to conditions) as opposed to the currently applying 9% taxation,” explained Nicos Chimarides, Partner in charge of Direct Tax Services at PwC Cyprus.