Cyprus removed from Russia's notorious 'blacklist'

Riga, Latvia, February 24, 2012, 10:00 / Advisory / Jurisdictions: Russia, Cyprus, Source: Tax-News
Russia's lower house of parliament, the Duma, has ratified the pending Protocol to the double tax avoidance agreement with Cyprus, confirming removal of the nation from Russia's notorious 'blacklist'.

In 2008 Russia added Cyprus to a 'blacklist' of 54 countries, on the grounds that it was an ‘uncooperative territory’. This blacklist was part of an amendment to the Russian tax code which introduced a tax exemption on the repatriation of dividends from foreign subsidiaries of Russian companies, but specifically excluded Russian subsidiaries based in territories and countries on the so-called blacklist.

The Protocol revising the agreement was signed in October 2010 and was swiftly ratified in Cyprus but has only just completed Russian ratification procedures.

Crucially, the agreement provides for the exchange of tax information between the two countries in accordance with the OECD model agreement, with a few bolstered provisions. The agreement covers every tax in place in both territories.

Pertinent tax changes in the revised agreement include the introduction of provisions for Russian profits taxation to be chargeable on Cypriot companies' capital gains received from the sale of shares in companies where more than half the capital comes from Russian real estate, at a rate of 20%, commencing four years after the Protocol's ratification. As per the terms of the agreement, it will enter into force on January 1 2013.

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