Details of the Cyprus & Russia Cross-Border Interest Hike

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Details of the Cyprus & Russia Cross-Border Interest Hike

Russia’s Ministry of Finance has announced that it signed a Protocol to amend its double tax agreement with Cyprus earlier this month. The Protocol will increase the withholding tax at source to 15% for dividends and interest income. The Ministry said ratification should be completed by the end of this year so that the provisions may apply from January 1st, 2021.

The Russian Government confirmed the agreement contains concessions agreed earlier with the Cypriot Government. An earlier statement from the Cypriot Government, in relation to withholding tax on interest and dividends, the two countries have agreed on the following:

  • The reduction of the said withholding tax (to 0 or 5% as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics.
  • Exemption from the said withholding tax applies on interest payments from corporate bonds, government bonds, and Eurobonds.
  • The Cypriot side has also secured the maintaining of zero withholding tax on royalty payments.

Russia is reviewing its network of double tax agreements to identify those agreements that do not permit taxation at source of dividends and interest income at least a 15% rate. Malta and Luxembourg have already agreed to amend their pact with Russia and negotiations are said to be ongoing with the Netherlands. The Russian Government has highlighted its intention to conduct similar negotiations with Hong Kong and Switzerland.