| After months of negotiation, the Russian parliament | | | | legal services, as well as its real estates, which |
| (Duma) has voted to approve a double taxation | | | | developed Cyprus into a successful international |
| treaty with Cyprus, making it easier for Russian | | | | business and financial centre. |
| citizens to buy property in the country. | | | | Some of the main factors and advantages which |
| The new treaty replaces the one signed between | | | | secure Cyprus ' attractiveness to international |
| the two countries in 1998. In the past decade, | | | | businesses and investments are the following: 10% |
| Cyprus has signed several double taxation treaties in | | | | corporate tax rate for business profits; No |
| an effort to make the country attractive to | | | | withholding taxes imposed on dividends, interest and |
| off-shore enterprises and property investors. Cyprus | | | | royalties for non-residents (whether a company or an |
| is clearly benefiting from the present arrangement | | | | individual); Income from dividends is exempt from |
| which allows it to become a base through which | | | | income or corporation tax; The attractive platform |
| foreign companies can do business in Russia. | | | | and tax regime that Cyprus provides for a holding |
| However, Russian officials have expressed their | | | | company (i.e. subject to certain conditions full |
| intention to amend the treaty. This is the third round | | | | exemption from local taxation in respect of dividends |
| of talks between the two parties and negotiations | | | | received by a holding company from its local and |
| are expected to continue. | | | | foreign subsidiaries); The attractive platform and tax |
| Cyprus is putting great efforts into attracting | | | | regime that Cyprus provides for international trusts; |
| offshore collective investment funds. The corporation | | | | The network of favorable double taxation treaties |
| tax rate for offshore companies of 4.25%, and the | | | | that Cyprus maintains with more than 40 countries |
| increasing number of double tax agreements with | | | | including Russia and most of the ex Soviet Union |
| other countries, are two strong reasons for | | | | Republics; Tax advantages available to non-residents |
| establishing a collective investment fund in Cyprus. | | | | including non - E.U. residents; Cypriot tax regime |
| Current legislation creates no problems for | | | | permits losses to be carried forward indefinitely; The |
| close-ended funds. A study has been commissioned | | | | geographic location of Cyprus, located at the |
| by the government for drafting the appropriate | | | | crossroads of Europe, Asia and Africa. |
| legislation for open-ended funds. | | | | Ukraine balks from treaty |
| Under the double tax treaty with Cyprus, investors | | | | Although the Russian government ratified the treaty, |
| can enjoy a 5% withholding tax rate on dividends | | | | the Ukrainian parliament has rejected a similar |
| distributed by a Russian subsidiary, rather than the | | | | agreement between itself and Cyprus. The Ukrainian |
| regular 15% rate. Therefore, using Cypriot holding | | | | government believes that the old treaty between |
| companies is one of the most typical vehicles to | | | | the Soviet Union, of which the Ukraine was a |
| structure inbound investments in Russia. | | | | member, and Cyprus in the 1980s, was too generous |
| Despite having numerous treaties, the signature from | | | | and allowed private individuals and companies to avoid |
| the Russian parliament is perhaps viewed as the | | | | paying the appropriate level of taxes in their home |
| most important one on the list. Scores of Western | | | | country. |
| businesses have established a presence in Cyprus to | | | | It has since rejected the new treaty with Cyprus |
| trade with Russian companies and Russians are now | | | | and is likely to take a further six months for it to be |
| viewed alongside the British as the most important | | | | altered and put before the country's government |
| international buyer group on the island. | | | | again. The Cypriot parliament is also unsure of the |
| Cyprus is one of the most advantageous places of | | | | treaty's composition and believes that it goes against |
| residency for Russian and Ukrainian companies. It | | | | the nature of the original agreement. |
| offers a high level of banking, auditing, accounting and | | | | |