The new terms of the double taxation treaty (DTT) will negatively affect the flow of direct investment from Cyprus to Russia. This opinion was shared by the Minister of Finance of the republic Konstantinos Petridis in an interview with Izvestia.
“Cyprus is traditionally one of the main starting points for foreign direct investment in Russia. The revision of the DTT is likely to have a negative impact on the volume of these flows. In this context, we did not calculate possible losses. Nevertheless, I must state that the rules of the game must be equal for everyone – this is a key point in maintaining mutual flows of direct investment between the two states. Cyprus is one of the most preferred destinations for investors, not only due to taxation, but also due to its rapid economic growth and favorable business environment, ”he said.
On March 25, Vladimir Putin, in his address to citizens, announced an increase in the tax rate on the withdrawal of capital abroad to 15%. Formally, it is now set at this level. However, thanks to agreements on the avoidance of double taxation (concluded by the Russian Federation with about 100 countries), businesses can optimize the level of payments up to 5%, and in some cases even up to 0%. Russia previously sent proposals to renegotiate agreements on new terms to Cyprus, Malta, Luxembourg and Holland. With the first three agreements have already been signed, although the Cypriots had to threaten to break the current document.
Under the new agreements, if a foreign resident owns at least 15% in a Russian company for at least one year and is a public company, whose shares are quoted on the stock exchange, pays 5%, not 15%. In addition, a number of preferences, up to full exemption from tax in the country of the source of income, are provided for government agencies, banks and bond issuers.
Read more in the exclusive material from Izvestia:
“The Russian authorities took into account our proposals for the protection of investments from Cyprus”