Cyprus removed from Russia’s ‘blacklist’

The Russian Federation and the Republic of Cyprus have signed a new double taxation protocol which secures Cyprus’  removal from the ‘blacklist’ of jurisdictions which have not demonstrated a sufficient level of cooperation with the Russian tax authorities. The existing tax treaty between Russia and Cyprus has been one of the major reasons for the huge flow of Russian investment through the Mediterranean island in recent years. In 2006, 21.6%, or USD28bn, of the USD130bn total accumulated investments in Russia came via Cyprus, while Russian deposits in Cypriot banks exceed USD26.35bn.

With the signing of the said protocol, Cyprus will be removed from the blacklist once the new protocol is fully ratified by both parties, thanks in large part to a commitment to improve exchange of information provisions on behalf of Cyprus. A major concession won by Russia will see capital gains made by Russian subsidiaries of Cypriot holding companies with more than 50% of their assets in Russian property taxed at the prevailing rates in Russia.