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Russia ratifies tax treaty with Cyprus - A Blog from Freemont Group

Freemont Group
03 March, 2012

Almost two years after Cyprus signed an amended tax treaty with Russia the latter has finally ratified it. Not that it posed a major obstacle for trade between the two countries, nor for Cyprus' booming financial service industry. Cyprus is and has been for many years one of the largest foreign investors in Russia, which is all to the credit of the superior financial services that the island offers.

The ratification only solidifies the special relationship between the two countries. Russia imposes a withholding tax on outgoing dividends to most other countries of 15% and 20% on interest, but dividends to holding companies in Cyprus are taxed at a mere 5% (on investments in companies with more than $100.000 share capital). In addition, Cyprus does not tax holding companies that invest in this way; no corporate tax, no capital gains tax and no withholding tax if dividends are sent abroad. Neither does it have stringent thin capitalization rules or minimal interest requirements that could undermine the benefits just mentioned.

Cyprus has established a vast tax treaty network and negotiated substantial reductions in withholding tax rates that would ordinarily apply. To cite some examples:

- Bulgaria 5%
- Hungary 5%
- Moldova 0%
- Poland 10%
- Romania 10%
- Russian 5%
- Singapore 0%
- Ukraine 0%
- US 5%

Cyprus has concluded over 50 tax treaties, an unusually high number for a low tax jurisdiction. The islands’ EU membership gives it access to the entire EU on the basis of the Parent-Subsidiary Directive, the Interest/Royalties Directive and the Mergers Directive. Many treaties with other EU member states increase Cyprus’ appeal even further. If you do business within the EU and consider investing in Eastern Europe or more ‘exotic’ destinations such as India, consider the following list:

Azerbaijan, Armenia, Austria, Belarus, Belgium, Bulgaria, Canada, China, CIS (ex-USSR), Czech Republic, Denmark, Egypt, Germany, France, Greece, Hungary, India, Ireland, Italy, Kuwait, Kyrgyzstan, Lebanon, Moldova, Malta, Mauritius, Norway, Poland, Qatar, Romania, Russia, San Marino, Serbia and Montenegro, Seychelles, Singapore, Slovakia, Slovenia, South Africa, Sweden, Syria, Tajikistan, Thailand, Ukraine, United Kingdom, United States, Yugoslavia.

Our office in Cyprus will be happy to assist you.



About the Author

Freemont Group

Freemont Group is a comprehensive provider of fiduciary services, including corporate formation and administration, trust, fund formation, legal-and tax services. Contact: info@freemontgroup.com


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