The agreement was signed by Constantinos Petrides, Minister of Finance of Cyprus, and Alexei Sazanov, Deputy Minister of Finance of Russia.
New DTA rates and exemptions with Cyprus
Earlier we said that the new DTA in Russia will increase the rates on dividends from companies and interest on bonds from 0-10% to 15%. During the negotiations, Russia and Cyprus made a number of exceptions to the agreement, under which the tax rate will remain the same.
An increase in the tax rate will not affect:
- dividends from regulated organizations – insurance companies and pension funds;
- dividends from listed companies (whose shares are traded on the stock exchange);
- interest payments from government, corporate and Eurobonds.
In other cases, from 1 January 2020 dividends and interest which are transferred from Russia to Cyprus will be taxed in the Russian Federation at an increased rate. It is assumed that this will add 130-150 billion rubles to the country’s budget for the year.
Changes in the DTA with other countries
Today Russia has double tax agreements with more than 80 countries. The Russian government plans to make similar changes to all agreements in order to comply with uniform conditions for jurisdictions.
The first steps towards this have already been taken. Malta and Luxembourg have agreed to raise the tax rate to 15% for the transfer of dividends and interest from Russia. It is planned that the updated tax agreements with these countries will also come into effect from 1 January 2021.
A proposal to amend the tax agreement has been sent to the Dutch Ministry of Finance. It is expected that the DTA revision will affect Switzerland and Singapore in the near future.
DTA revision between other countries
Tax agreements between countries are reviewed regularly. This is necessary to improve tax transparency between countries and to maintain economic ties in the global community.
For example, Cyprus and Switzerland amended the DTA in June 2020. In this case, the change was not dictated by an increase in tax rates, but by the introduction of Organisation for Economic Co-operation and Development (OECD) standards. The new procedures are aimed at combating tax evasion.