On 3 August 2020, the Russian Ministry of Finance (MinFin) announced that it is initiating the formal procedures aiming to denounce the Double Taxation Treaty (DTT) with the Republic of Cyprus.
Earlier this year, Russian authorities declared the intention to increase the actual tax rate applied to income paid from Russian sources to the residents of certain jurisdictions including Cyprus (for the additional information please refer to the Newsletter article dated June 30, 2020). In June-July 2020 MinFin carried out negotiations with the Cyprus authorities to increase the DTT tax rates applicable to dividend and interest payments to 15%, however the parties have not reached an agreement.
Further details will be provided as they become available.
Impact on investors: When the DTT termination procedures are finalized, dividend and coupon payments from Russian issuers will be subject to statutory tax rates if the disclosed actual recipient of the respective income is a tax resident of Cyprus.