Russia and Cyprus agree on tax

RUSSIA / FSU POLITICS - In Brief 14 Sep 2020 by Alex Teddy
On September 8 an agreement was signed allowing Russia to raise tax on Russian companies incorporated in Cyprus. Their profits earned abroad and remitted to Russia will be taxed at a higher rate than before. It was 5% or 10%. It will be 15% now. There are exemptions for state owned companies.Putin wanted more revenue from profits earned in law tax countries and sent to Russia. This is a key plank of the economic response to coronavirus. Many companies had reduced their tax liability basing themselves abroad. Putin said he would renege on double taxation treaties of other countries did not cooperate. Russia is so important that Cypriot tourism that Cypriots caved in easily. Malta and Luxembourg have already made a similar deal with Moscow. The Netherlands is in parley with Russia on the issue. Many Russian companies are based in Cyprus. Its low tax, EU membership, strict secrecy laws, English language and common law make it appealing. The country has a golden passport scheme enabling affluent Russians to buy citizenship. Over 1 000 Russians have availed themselves of the scheme. People had to invest USD 2.5 million which could simply mean buying a house. New anti money laundering laws and the US sanctions have made it harder to benefit from the golden passport policy. A new Cypriot law in 2019 said that a Politically Exposed Person cannot gain citizenship through investment now. Russians started to look elsewhere when this happened. PriceWaterhouseCooper's estimated that Russia will earn an additional USD 2 billion from the new tax agreement. The new dispensation takes effect on January 1 2021.

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