Russia Double Tax Treaty: Implementation Postponement – Amendment of Article 13 “Capital Gains”

January 12, 2017

|Thenia Elena Lambridou, Associate Lawyer

The Cyprus Ministry of Finance, last week announced that an agreement has been reached between the Russian Authorities and the Authorities of Cyprus for postponing the application of the Protocol, amending Article 13 ‘‘Capital Gains’’ of the Agreement between the Government of the Republic of Cyprus and the Government of the Russian Federation for the Avoidance of double taxation with respect to taxes on income and on capital.

The Protocol signed on the 7th of October, provided changes for taxation of capital gains upon disposal of shares of companies deriving more than 50% of their value from immovable property, in the country where the immovable property is located. Incomes from such sales of shares would have been taxable in Russia at the rate of 20%, starting from year 2017.

In parallel, an additional Protocol is being finalized, providing for the application of the revised provisions of Article 13 of the said Agreement, until similar provisions are introduced in other bilateral Agreements for the avoidance of double taxation between the Russian Federation and other European countries.

Russia and Cyprus through the years have developed strong ties in economic, political and religious level. Russia is one of the Cyprus’ major economic partners and the abovementioned agreement is of vital importance as it implies that capital gains from the sale of shares of Russian real estate companies are taxed in Cyprus not in Russia and therefore as per the Cyprus Tax Law, no tax is paid on capital gains. This agreement will strengthen even more the business and economic relations between the two countries.