“The Ministry of Finance also wishes to assure that as a member of the European Union, the Republic of Cyprus did not have the opportunity for any consultation on the matter”
“It is not expected that there will be any further consequences” from the issuance of a decree to suspend the application of certain provisions of the Double Taxation Agreement regarding the income taxes to avoid double taxation, with countries that Russia considers hostile states, the Ministry of Finance states in its announcement.
The relevant announcement
The Republic of Cyprus has been informed through the Diplomatic channel that the Russian President signed on August 8, 2023, a Decree on the suspension of the application of certain provisions of the Double Taxation Avoidance Agreement regarding taxes on income to avoid double taxation, with countries it considers hostile states, such as the United States, Japan, member countries of the European Union and others, including Cyprus.
The Decree suspends certain provisions of the said agreements with several member states of the European Union and third countries, namely with South Korea, the United Kingdom, Albania, Canada, Switzerland, Montenegro, Poland, Hungary, Ireland , Slovakia, Belgium, Slovenia, Czech Republic, Denmark, Italy, Finland, Germany, France, North Macedonia, Spain, Lithuania, Iceland, Portugal, Austria, Greece, New Zealand, Australia, Singapore, Malta, Japan.
The Decree states that the agreements are suspended until “the elimination by foreign states of violations of the legitimate economic and other interests of the Russian Federation, the rights of its citizens and legal entities.”
Since the issuance of the Decree, the application of reduced tax rates or tax exemption in relation to incomes covered by double taxation avoidance agreements is suspended.
The provisions of the Cyprus Agreement with the Russian Federation that are affected are Articles 5-22, 24, 27 and Article 29. In view of the prohibitions already put in place by the Russian Federation, on the export of foreign currency and payments to jurisdictions it considers “hostile” due to of the sanctions imposed on it, which include Cyprus, and the sanctions imposed on the Russian Federation which resulted in the suspension of any extensive economic/trade relations with European States, it is not expected that there will be any further consequences from the issuance of the decree in question due to the non-implementation of the Agreement.
The Ministry of Finance also wishes to assure that as a member of the European Union the Republic of Cyprus did not have the opportunity for any consultation on the matter and neither was there any prior consultation with the competent authorities of the Russian Federation regarding the possibility of suspension of the Agreement or the issuance of a decree by the Russian Federation.
