PROTOCOL AMENDING CYPRUS – RUSSIA DOUBLE TAX TREATY USHERS IN NEW ERA
On 8 September 2020 Cyprus and Russia signed a protocol amending the double #tax treaty (DTT) between the two states. The revised DTT will become effective as of 1 January 2021.
The proposed amendments increase the applicable withholding taxation (WHT) rates for outbound interest and dividend payments, as previously reported.
According to the agreement reached, the existing withholding tax (WHT) rates on dividend and interest payments made from #Russia to #Cyprus will increase to 15% subject to certain exceptions.
Exceptions from 15% WHT
The two countries have agreed that a 5% WHT should apply, where the recipient/beneficial owner of a dividend is:
- a regulated entity such as a pension fund or insurance undertaking.
- a company the shares of which are listed on a registered stock exchange (subject to conditions).
- the Government or a political subdivision or local authority.
- the Central Bank.
Moreover, the two countries have agreed that no WHT shall apply on interest payments if the beneficial owner is:
- an insurance undertaking or a pension fund.
- the Government or a political subdivision or local authority.
- the Central Bank.
- a banking institution.
Furthermore, no WHT shall apply in respect of interest earned on the following listed bonds:
- corporate bonds.
- government bonds.
- Eurobonds.
Finally, where the beneficial owner of the interest is a company whose shares are listed on a registered stock exchange (subject to conditions), the WHT shall not exceed 5%.
Nil WHT on royalty payments
The nil WHT on royalty payments from Russia to Cyprus will not change.
Local Withholding Tax Rates Remain at 0% for Non-Residents
Cyprus will continue to apply no withholding tax on dividends and interest payments to non-residents of Cyprus as per the local domestic legislation.
Effective date
The provisions of the amending protocol will come into force from 1 January 2021.
H. Priority Trust Services are ready to support your business in assessing the impact of these amendments on your structure and discuss any actions that can be taken.
Please take into consideration that the content of this article is intended to provide a general guide to the subject matter. Our specialist advice should be sought about your specific circumstances.