On 8 September 2020, the Republic of Cyprus and the Russian Federation signed the Protocol to amend the double tax treaty between the two countries. The amendments to the Treaty should be effective as of 1 January 2021 (provided the Protocol is ratified by both parties by the end of 2020).
We hereby list the most salient points that emerge from the Protocol.
The Russian Federation assured the Republic of Cyprus that the changes are purely tax related and, for the future, Russia would halt any further actions aimed at terminating the Treaty and commits itself to maintain a level playing field. Russia said it would seek the same agreement with other countries to be effective on 1 January 2021.
The changes mainly concern Withholding tax (WHT) on dividends and interest.
The standard WHT rate under the Treaty is increased to 15% (provided the recipient is a beneficial owner of the dividend income).
A reduced 5% WHT is applied, among others, to the following categories:
The ordinary WHT rate under the Treaty is increased to 15% (provided the recipient is a beneficial owner of the interest income).
A reduced 5% WHT rate is applied if the beneficial owner of the interest is a company whose shares are listed on a registered stock exchange, provided that no less than 15% of voting shares of that company are in free float, and it holds directly at least 15% of the capital of the company paying the interest throughout a 365-day period that includes the day of payment of the interest.
A reduced 0% WHT rate is applied, among others, to the following categories (provided the beneficial ownership test is met):