Russia and Cyprus held regular negotiations on amending the DTA. The Cypriot delegation fully agreed to the terms of the Russian side. As a result, the parties signed a draft protocol. It is planned to sign it finally in September.
The Protocol will be ratified before the end of 2020 and it will enter into force on 1 January 2021. Thus, from the beginning of next year the tax rate on dividends and interest paid by Russian companies in Cyprus will be 15% instead of 0-10%. The proposal of Cyprus to exempt some companies from tax increases has been rejected and, accordingly, is not taken into account in the draft protocol.
For Russia, the talks were attended by Deputy Prime Minister Alexei Overchuk (Алексей Оверчук) and Deputy Finance Minister Alexei Sazanov (Алексей Сазанов). Cyprus was represented by a delegation headed by Minister of Finance Constantinos Petrides.
Refusal to terminate the agreement
Alexei Sazanov (Алексей Сазанов) said that since the preliminary signing of the protocol took place, the Russian side is stopping the process of denunciation of the tax agreement with Cyprus.
Earlier we told that Russia started denunciation of DTA with Cyprus on August 3, 2020. Russian Finance Ministry said that the proposals of the Cypriot side hinder the achievement of the economic effect necessary for Russia.
DTA revision with other countries
Russia is reviewing tax agreements with other countries. Alexei Sazanov ( (Алексей Сазанов) said that in the next month it is planned to complete negotiations with Malta and Luxembourg on the same terms as those offered to Cyprus.
Russia is also waiting for a response from the Netherlands – similar proposals for the revision of DTA have been sent to the government of this country.
Earlier we told that the RF Ministry of Finance had prepared an agreement with Malta on DTA termination. If the agreement is denounced or amended on Russian terms, taxes on dividends and interest paid in Malta will also increase to 15%.
Cyprus and Malta are among the top 3 countries where Russians prefer to become tax residents. Malta and Cyprus citizenship programs for investment are popular with Russian investors.
We believe that the DTA change will not affect the popularity of Cyprus and Malta passports. Their main advantage is the opportunity to live, study and work in any EU country. With a passport of one of these countries, the investor can choose a suitable tax residence in Europe.