After extensive negotiations between Cyprus and Russia, the Cypriot Ministry of Finance and the Russian Ministry of Finance announced on 10 August 2020 that the Protocol (the “Protocol”) amending the Cyprus and Russia Double Tax Treaty (as amended) (the “DTT”) was agreed between the two states.
 
The Russian Ministry of Finance had sent a request in March 2020 to the Cypriot Ministry of Finance for the amendment of the DTT, specifically requesting the increase of the withholding tax rates on dividend and interest payments to 15%, from the currently applicable rates of 5% or 10% on dividends and 0% on interest.
 
According to the press release of the Cypriot Ministry of Finance, it was agreed that the withholding tax rate on dividend and interest payments will be increased to 15% respectively with certain exceptions. More specifically, it was agreed to lower the withholding tax rates to 0% or 5% (as appropriate) on dividend and interest payments where the recipient/beneficial owner is a regulated entity, such as pension funds and insurance undertakings as well as listed entities with specific characteristics. Furthermore, it was agreed that exemption from the said withholding tax rate will apply on interest payments from corporate bonds, government bonds and Eurobonds. The Cypriot side also secured the maintaining of 0% withholding tax on royalty payments.
 
In light of the above, the Russian side confirmed the termination of the process to denounce the DTT, noting further that same provisions will also apply to other states, which are parties to similar agreements with Russia, and that these provisions will be effective as of 1 January 2021, as this reflects Russia’s fiscal and tax policy to raise government revenues.
 
Both sides aim to sign the Protocol in autumn 2020, so as to be effective from 1 January 2021.