The duty on shares of Cyprus companies that own Russian real estate has been suspended

The duty expected to be imposed on share transactions of Cyprus offshore companies that have invested in Russian business and acquired real estate has been temporarily suspended.

The Protocol signed in 2010 with respect to the 1998 Cyprus-Russia Double Tax Treaty assumed a tax to be introduced as of 2017 in terms of transactions with shares of Cyprus offshore companies that directly or indirectly own real property in Russia. Cyprus has no taxation of capital gains and securities gains. Pursuant to the 1998 Russian-Cyprus Double Tax Treaty, transactions with the shares of Cyprus offshore companies that directly or indirectly own Russian property were charged, only in the country of such companies’ tax residence, which means they were not taxed at all. The 2010 Protocol was intended to alter the current loop-hole.

The Decision to suspend the tax introduction will remain effective until other EU countries ratify similar provisions in their double taxation agreements signed with Russia.