Russia axes double taxation agreement with Cyprus

Cyprus along with all countries that imposed sanctions on Russia have had their double taxation agreements suspended, an announcement from the finance ministry said on Wednesday.

The decree was signed by Russian President Vladimir Putin on Tuesday, and Cyprus said they were informed via diplomatic channel that the double taxation agreement had been axed.

According to reports, the decree included double taxation agreements with what it called “unfriendly countries” – those that have imposed sanctions on Moscow.

The decree states that the agreements are suspended until “the elimination by foreign states of violations of the legitimate economic and other interests of the Russian Federation, the rights of its citizens and legal entities.”

From the issuance of the decree, the application of reduced tax rates or tax exemption in relation to incomes covered by double taxation avoidance agreements is suspended.

The provisions of the Cyprus Agreement with the Russian Federation that are affected are Articles 5-22, 24, 27 and Article 29.

The ministry said that in view of the prohibitions already put in place by the Russian Federation, on the export of foreign currency and payments to jurisdictions it considers “hostile” due to of the sanctions imposed on it, which include Cyprus, and the sanctions imposed on the Russian Federation which have resulted in the cessation of any extensive economic/trade relations with European states, it is not expected that there will be any further consequences from the issuance of said decree from non-implementation of the agreement.

“The Ministry of Finance also wishes to assure that, as a member of the European Union, the Republic of Cyprus did not have the opportunity for any consultation on the matter, nor was there any previous consultation with the competent authorities of the Russian Federation regarding the possibility of suspending the agreement or decree issued by the Russian Federation,” the ministry said.