The new tax agreement with Cyprus, which increases the tax on dividends and interest to 15%, includes a number of exceptions. They are aimed at preventing higher financing costs for Russian companies and worsening conditions for public Cypriot companies that have invested in Russia. This was announced by Deputy Finance Minister Alexei Sazanov.

Recall that in autumn Russia and Cyprus signed a protocol on amendments to the intergovernmental agreement on avoidance of double taxation. According to the document the basic tax rate for dividends and interest paid by Russian companies to Cyprus is increased to 15%, but there is also a preferential rate of 5%. The rate applies to institutional investments, as well as for public companies (at least 15% of free float), if they have owned at least 15% of the capital of the company paying the income for at least a year. Earlier on Tuesday, the State Duma ratified the tax agreement with Cyprus.

“State-owned companies are not covered here because these exceptions apply only to companies that have a real economic presence in Cyprus, an actual right to income. And in terms of loans and bond payments, these exemptions are made so that for Russian companies there would be no appreciation of financing from retail European investors,” said Sazanov.

“As for public companies, the exception is made for Cypriot public companies that have many retail investors, so that the conditions for them are not worse than when they invested money in Russia,” he added.