On March 25, 2020 the resident of Russia, Vladimir Putin made an official announcement and clarified some of the measures to support businesses.
The tax rate on dividends and interests paid to foreign business owners will be 15%
The rate of 15% is established by Russian legislation and applies if there is no Double tax treaty (DTT) signed with the country to which the income is paid. Under the terms of such DTTs with the majority of countries, depending on various conditions, the tax rates of 0%, 5% or 10% are usually applied and withheld by the Russian company on the payment. The change announced by the President will require changes to the existing DTTs. At the same time, it was noted that if foreign countries do not cooperate with Russia, Russia will unilaterally withdraw from the consequent DTT. If that happens, the companies may suffer because of the double taxation of their income.
The Republic of Cyprus became the first country to which the Russian Government sent an official notification on April 1, 2020
The Russian Government is requesting the implementation of the withholding tax rate for dividends and interest at 15% rate. In the absence of a positive feedback from the Government of the Republic of Cyprus the Russian Government will terminate the DTT.
The Republic of Cyprus is among countries with the biggest volume of investments into the Russian economy. Historically, a big portion of Russian investments was structured through the Republic of Cyprus getting benefits out of the favorable DTT. Currently Russia has more than 100 DTTs. It is expected that more countries will appear on the list for DTTs amendments by April 24, 2020.
