Cyprus – Russia Double Tax Treaty: Important Amendments

On 10 August 2020, the Republic of Cyprus and the Russian Federation  agreed to amend their Double Tax Treaty (DTT) of 1998 as amended in 2010. The amending protocol was signed on 8 September 2020. The aim of both sides is for the DTT to become effective as from 1 January 2021, subject to the ratification procedure.

The amended DTT increases the Withholding Tax (WHT) on dividends and interest paid from Russia to Cyprus from 5% and 0% respectively to 15%.

A reduced rate of 0% or 5% as appropriate will apply for regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. Furthermore, no WHT will apply on interest payments from corporate and government bonds as well as Eurobonds.

Royalty payments will continue to enjoy a 0% WHT rate.

It is reminded that payments of dividends, interest and royalties (the latter when earned outside the country) from Cyprus to non-resident persons are fee for any WHT, irrespective of their destination and on whether they are physical or legal persons.

The Russian Federation has confirmed that the same provisions will apply to its DTTs with other treaty partners and especially with Luxembourg, Malta and the Netherlands  with the same effective date of 1 January 2021, as this is part of its fiscal and tax policy to raise Government revenues. Indeed the procedure for implementing the relevant amendments to the said DTTs is already under way. 

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