The Russian and Cyprus governments on August 10 announced that they have reached an agreement to add a protocol to their tax treaty that would increase the withholding tax on interest and dividend payments to 15 percent.
The agreement exempts regulated entities, such as pension funds and insurance undertakings, calling for a zero or 5% withholding tax, in those cases; it also exempts “listed entities with specific characteristics,” Cyprus’s Ministry of Finance said.
“Additionally, exemption from the said withholding tax applies on interest payments from corporate bonds, government bonds and Eurobonds,” the Cyprus officials confirmed. The Russia-Cyprus tax treaty’s zero withholding tax on royalty payments will not be changed.
Russia and Cyprus expect to sign the protocol this fall and the new agreement would apply from January 1, 2021.
According to press reports quoting Russian Deputy Finance Minister, Alexei Sazanov, the Russian Ministry has made similar demands to increase the withholding tax on interest and dividends to the Netherlands, Luxemburg, and Malta.
The Russian government confirmed August 10 that it sent a request to the Netherlands to revise the Russia-Netherlands tax treaty on the same terms as those agreed to with Cyprus.
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