Russian President Vladimir Putin has shocked the business world when he announced that all interest and dividend payments leaving Russia will incur a 15% tax — up from the current 2%.
This means that all double taxation treaties, including that with Cyprus, will now have to be renegotiated.
The shocking news came this week when he addressed the nation on the coronavirus pandemic for the first time — a month after Russia announced its first case.
Putin did not rule out the possibility of Russia withdrawing from agreements unilaterally in case foreign partners do not accept new conditions.
He also said that they will start from the countries through which significant resources of Russian origin are passing since these are the most sensitive for the country.
The news will be another blow to the Cyprus economy and the professionals in the services sector since they have close relations with Moscow, Phileleftheros reports.
President of the Institute of Certified Public Accountants of Cyprus (ICPAC) Demetris Vakis said that the changes won’t be implemented immediately and this gives time to Nicosia and the sector’s professionals to make essential moves.
“To what extent and at what time we will be affected it all depends on final decisions to be taken,” Vakis said before adding that he is concerned over the consequences on the service professionals since business ties with Russia are close, indeed.
But the impact won’t be immediate but rather gradual, he added.
“It will take some time and we should first wait and see with what countries Russia will seek to renegotiate agreements,” he added.
He also said that in order for Nicosia to draft a new strategy it will have t see Russia’s moves first.
“We will strive to be the last country to negotiate with Moscow,” he added.
Putin’s announcement, however, is clear enough that all holding companies or those that have lent money to companies in Russia and therefore have income from interest will be affected.
Asked if Cyprus-based Russian companies will rush to leave the island, he said it is something they can’t tell at this stage.
A determining factor will be whether what Putin announced will include all countries Russia has business ties with or only specific ones to start with.
By Demetra Landou