Amendment of Article 13 of the Cyprus-Russia Double Tax Treaty

17 March 2017

The Ministry of Finance of the Republic of Cyprus announced that Cyprus and Russia have agreed to postpone the application of the Protocol amending Article 13 of the Double Tax Treaty between Cyprus and Russia for the Avoidance of Double Taxation with respect to taxes on income and on capital, signed on the 27th of October, 2010.

Based on the double taxation agreement signed by both parties in 1998, gains on disposal of shares are taxable only in the country of residence of the person disposing of the shares.

The amended Protocol, which was expected to enter into force on the 1st of January 2017 states that capital gains should be taxable in the country where the property is located. Therefore, Companies owning Immovable Property in Russia would be taxable in Russia, even though they are managed and controlled in Cyprus. However, as per the announcement of the Ministry of Finance, the new protocol is to be signed to implement the revised provisions of Article 13 until similar provisions are introduced in other bilateral agreements between Russia and other European countries.

Consequently, capital gains arising from the disposal of shares of property-rich companies in either country, will continue to be taxable only in the country of residence of the person disposing of the shares and shares in other companies will not be affected.