Page 53 - RusRPTSept20

6.1.2 Budget dynamics - specific issues...
Russia will start the procedure of pulling out of the double taxation agreement (DTA) with Cyprus, the Finance Ministry announced on August 3. The ministry commented that negotiations on revising the DTA had not yielded any results.
Cyprus is the number one offshore destination for Russian capital, with over $14.5bn of Russian investment in 2019 on the island and $8bn of foreign direct investment (FDI) coming back to Russia from Cyprus-registered companies, according to the Central Bank of Russia (CBR).
The previous DTA with Cyprus allowed the tax rate on dividends and interest paid overseas to be cut from 15% and 20% to 5% and 0% respectively, Vedomosti daily reminds.
As reported by bne IntelliNews, previously President Vladimir Putin urged raising the taxes on dividends and interest in March 2020.
The Finance Ministry shortly afterwards proposed to the governments of Cyprus, Malta and Luxembourg that they raise the taxes to 15% or to revise the DTAs. But unnamed sources told Vedomosti in June that Cyprus refused to hike the tax rate, instead suggesting stepping up due diligence and control of the Russian holdings on the island.
The ministry's representatives told Vedomosti that setting up holding structures in Cyprus will cease to be profitable for Russian capital without the DTA. Instead, the transfer to domestic offshore zones will be encouraged by the government.
53 RUSSIA Country Report September 2020 www.intellinews.com