On 10 August 2020 the Ministries of Finance of Russia and Cyprus announced that they had reached an agreement on the amendment of the Double Taxation Treaty (DTT) between the countries. The withholding tax on dividend and interest payments will be increased to 15%. At the same time, according to the Cypriot side, the parties also agreed to the following concessions:
the reduced tax rates (0% and 5%) will still be applied to regulated entities (such as pension funds and insurance undertakings) and to the listed entities which satisfy certain criteria;
tax exemption will be provided for interest payments from corporate bonds, government bonds, and Eurobonds.
It is expected that the Russian side will now cease the denunciation procedures, which were reported in our Newsflash on August 04, 2020.
According to the Russian Ministry of Finance, Luxembourg and Malta have also agreed to increase the withholding tax to 15%. The final negotiations on the details of these amendments will take place in the near future. Further details will be provided as they become available.
Impact on investors: Tax rates applied to income from Russian securities will be increased for the residents of Cyprus, Luxembourg and Malta.