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Russia: changing double taxation treaty with Cyprus nothing political (Updated)

File photo: Foreign Minister Nicos Christodoulides with his Russian counterpart Sergey Lavrov

Russia said Friday a decision to unilaterally amend its double taxation treaty with Cyprus and impose a 15 per cent tax on dividends transferred to foreign bank accounts was part of a policy that will be applied to all such treaties with EU member states.

Foreign Minister Nicos Christodoulides spoke to his Russian counterpart Sergei Lavrov on Friday and he was informed that the decision did not only apply to Cyprus.

Lavrov informed Christodoulides that the particular proposal was part of a decision by Russia to change the terms of all double taxation treaties with EU member states, a foreign ministry statement said.

“Within this framework, similar proposals will be sent to all European Union member states with which the Russian Federation has double taxation treaties.”

Earlier Friday, the Russian embassy in Nicosia stressed that there were no political reasons behind the decision to raise the tax from the current 5 per cent and 10 per cent, and that Cyprus had been the first country to be notified of the decision for objective reasons.

“Thirty-four per cent of the cumulative direct foreign investment in the Russian economy comes from Cyprus,” the embassy told the Cyprus News Agency (CNA). “We also want to stress that there are no political reasons for this Russian action.”

The embassy said amendments will also take place to taxation treaties with other countries “mainly those which large amounts of Russian money go through”.

Last week, Russian President Vladimir Putin proposed a 15 per cent tax on dividends transferred to foreign bank accounts, noting that it would require adjusting double taxation avoidance agreement with other countries.

Putin reportedly added that Russia would unilaterally exit any such agreement if its offers were not accepted.

On Wednesday, Prime Minister Mikhail Mishustin said that Russia had sent the Cypriot government a letter about said adjustments.

Pwc CEO and chairman of the Cyprus Russian business association, Evgenios Evgeniou, told CNA that the change was expected to have a negative impact if there were no changes to similar treaties between Moscow, the Netherlands and Luxembourg.

 

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