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No fallout from Russia Tax Agreement axe

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Cyprus is not expected to face any further consequences following the decree signed by Russian President Vladimir Putin for suspending certain provisions of international taxation agreements, said the Finance Ministry.

A statement issued by the Ministry of Finance said the Russian Federation has already imposed bans on currency export and payments to jurisdictions it considers “hostile” due to the sanctions imposed on it over Ukraine, including Cyprus.

The sanctions imposed on the Russian Federation, it is added, have also led to the cessation of any extensive economic or trade relations with EU countries.

“Therefore, the Ministry of Finance does not expect any further consequences from the non-application of the Double Taxation Avoidance Agreement,” the statement said.

“As a member of the EU, the Republic of Cyprus did not have the opportunity for any consultations on this matter, nor was there any prior consultation with the competent authorities of the Russian Federation regarding the possibility of suspending the Agreement or issuing a decree by the Russian Federation.

“The Republic of Cyprus was informed through diplomatic channels the Russian President signed a Decree on August 8, 2023, for the suspension of the application of certain provisions of the Double Taxation Avoidance Agreement.”

It covers income taxes to avoid double taxation with countries it considers “hostile states,” including the United States, Japan, European Union member states, and others, including Cyprus.

The decree states the agreements will be suspended until foreign countries eliminate violations of the legitimate economic and other interests of the Russian Federation, the rights of their citizens and legal entities.

From the issuance of the decree, the application of reduced tax rates or tax exemptions related to incomes covered by the double taxation avoidance agreements is suspended.

The provisions of the Cyprus-Russia Agreement affected are Articles 5-22, 24, 27, and Article 29.