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The Ministry of Finance of the Republic of Cyprus announced that the state authorities of Cyprus and Russia have agreed to postpone the implementation of the Protocol amending Article 13 of the Double Tax Treaty (DDT) between Cyprus and Russia for the Avoidance of Double Taxation with respect to taxes on income and on capital, signed by the Republic of Cyprus and Russian Federation on the 7th of October 2010.

According to the 1998 double taxation agreement between the two countries, gains on disposals 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 was based on the latest OECD principles providing that capital gains should be taxable in the country where the property is located. That is to say, companies owning immovable property in Russia would be taxable in Russia.  Nevertheless, the application of the aforementioned provision has been deferred until the introduction of similar provisions in the bilateral Double Tax Treaties of Russia with other European countries.

As a result, according to the Double Tax Treaty concluded between the authorities of Cyprus and Russia, 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. Shares in other companies will not be affected. Following, the official announcement of the Ministry of Finance of the Republic of Cyprus, an additional Protocol is being finalised in order to formalise the deferral.

The legal team of Michael Chambers & Co. LLC will monitor all the ongoing developments. Our team of Cyprus lawyers is able to provide you with a professional legal advice on how you can incorporate this Double Tax Agreement in your tax planning strategy. The international tax planning department of Michael Chambers & Co. LLC focuses on providing cost-effective solutions. If you wish to speak to one of our lawyers, in absolute confidence, then please contact us: info@chambers.law