InsiderBusinessRussia tax message to Malta, Luxembourg levels playing field for Cyprus

Russia tax message to Malta, Luxembourg levels playing field for Cyprus

Russia has notified Malta and Luxembourg about amendments to its double tax avoidance agreements, two countries which are competitors to Cyprus in attracting Russian capital.

Cyprus has already been notified by Moscow of such a change and yesterday’s development if nothing else, levels the playing field.

Both ICPAC and the Cyprus-Russian Business Association had previously told Phileleftheros that it was important for comparative changes to be made with double tax agreements Russia has with other countries such as the Netherlands and Luxembourg.

Phileleftheros reports that Cyprus may have been the first to be notified because of the large number of Russian businesses here. The Russian embassy had spoken of objective reasons since 34% of direct foreign investments in the Russian economy comes via Cyprus.

“The Russian Finance Ministry sent letters to finance ministries of Luxembourg and Malta concerning introduction of amendments into bilateral double taxation agreements in respect of increasing the rate of the tax on dividend and interest gains to 15%,” the press service of the ministry said, as cited by Tass.

Amendments were made as part of implementing the assignment of Russian President Vladimir Putin, who had suggested setting a higher (15%) tax on dividends withdrawn to accounts overseas, the Ministry said.

Changes will not affect interest gains paid on Eurobond loans, bond loans of Russian companies and loans extended by foreign banks. Relevant payments from Russia will be governed by the Russian fiscal law, the ministry noted. The Russian Finance Ministry has also notified Cyprus authorities about changes to the agreement earlier.

Phileleftheros reports that this development has given grounds for some optimism among professionals in the services sector that few Russian companies will opt to transfer their HQ to Russia and given that the other options will be subject to the same changes, they will keep their companies here.

Still pending for clarification is the situation regarding the Netherlands, the paper added.

Demetra Landou

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