A Russian Embassy spokesperson has confirmed in an interview with the Cyprus Mail that the negotiations scheduled for August 10-11 regarding the Double Tax Treaty will take place as announced.
The spokesman said that a “large delegation” would be involved in the negotiations in Moscow on those dates. “Russian Federation President Vladimir Putin told the delegation that those who had been planning holidays for that time would have to cancel them,” the spokesman said.
He added that it is clear that real negotiations on the highest level are in store.
This confirms the statement made on Monday evening by the Cypriot Finance Ministry which said negotiations between the two sides have been scheduled for August 10 and 11. The Cypriot delegation will be headed by Finance Minister Constantinos Petrides.
“There is no reason to be certain about anything for now,” comments Spyros Ioannou, director and head of Tax at the Limassol-based Primus, “but there is still hope that Cyprus can gain some of its objectives at the negotiating table – it does seem, however, that the Russians want some kind of quid pro quo for agreeing to Cypriot requests.”
The issue for Cyprus is undoubtedly considerable. According to Russian Finance Ministry estimates, more than €16 billion were withdrawn to Cyprus in 2018 and more than €21.9 billion in 2019 under the terms of the existing double taxation treaty.
These would now be taxed at 15 per cent, up from 5-10 per cent if the treaty is ratified according to the terms sought by Russia. Cyprus is seeking some exceptions to these terms.
These announcements follow in the wake of Russia’s Finance Ministry statement on Monday that it would initiate a process to scrap an agreement with Cyprus aimed at avoiding double taxation – after talks to modify the deal apparently failed – and that legal changes would make it more profitable for people to transfer money back to Russia.
The Russian Finance Ministry, in an announcement said it had begun the procedure, claiming that the Cyprus government had refused face-to-face negotiations for a new agreement. The ministry’s statement was published in the Russian language only.
Reuters reported Russia’s Deputy Finance Minister Alexei Sazanov as saying talks with Cyprus on changing the agreement in line with Putin’s request had failed.
“Unfortunately, today we have to admit that the talks did not yield results,” Sazanov said.
“Restructuring one’s holding structures through Cyprus will of course become disadvantageous. It will be more advantageous to transfer everything back to Russia.”
Sazanov added the ministry was working on improving the Russian legislative framework to facilitate the transfer of holdings to Russia.