The Russian Federation has yet to confirm the statement made on Monday evening by the Cypriot Finance Ministry which said that negotiations between the two sides regarding the Cyprus-Russia Double-Taxation Treaty have been scheduled for August 10 and 11.
The Cyprus Russian Business Association sent a letter to its members on Tuesday noting that there had been no confirmation from the Russian Federation of continuing the negotiations.
The Russian Finance Ministry published a statement on Monday saying that the treaty would be terminated and that the legislation to do so was being introduced in parliament.
On the other hand, Cyprus Finance Ministry sources told the Cyprus Mail on Tuesday that the meetings took place by Russian invitation, but they would not say when that invitation was made — before or after the Russian announcement that the treaty would be terminated.
Cyprus had been negotiating with Russian Finance Ministry officials to reduce the raising of withholding tax on interest and dividends outbound from Russia to Cyprus to 15 per cent in specific instances.
The press office of the Russian Embassy in Cyprus could not be reached for comment.
In April this year, Russia had notified Cyprus of changes to the withholding tax on outbound payments and other aspects of the tax agreement, which would come into force on January 1, 2021,
The Russian Finance Ministry announcement on Monday said: “At the same time, taking into account the close economic and historical ties between the two states, the Russian side formulated options for a compromise solution to this issue and offered to promptly hold face-to-face talks in Cyprus during this week in order to come to a solution, but the offer was refused.”
Russia’s Finance Ministry said Monday 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 Russian parliament is also at work on legislation that would change the rules regarding residency in Cyprus for Russian individuals and companies. This legislation, if passed, would also complicate financial dealings between Russian companies and entities in Cyprus.