On February 15, 2012, Cyprus and Russia further strengthened their longstanding economic cooperation when Russia's State Duma Sergey Naryshkin ratified the amending Protocol to the Cyprus-Russia Double Tax Treaty of 1998. Since the original signing, the Double Tax Treaty has been again signed in 2010 and ratified in 2011. These agreements have led to a marked upswing in Russia-to-Cyprus investments and vice versa. In fact, Russia is currently a leading investing country in Cyprus. And now, with the recent ratification of this Protocol, Cyprus is poised to be one of the most financially beneficial jurisdictions for Russia's entrepreneurs.
When the Protocol comes into effect, Cyprus offshore companies will have tax exemptions in Cyprus, as well as in Russia. Furthermore, the Double Tax Treaty will most likely remove Cyprus from Russia’s “black list,” upon which Cyprus was placed on Jan. 1, 2008. Removal from the Russian ‘’black list” will bring new opportunities for Russian investors of Cyprus companies, paving the way for profitable business with Europe, Asia and Africa.
The amending agreement will be complete when both countries have signed their ratification agendas. At this time, the protocol is awaiting the signature of Russian President Dmitry Medvedev. If Medvedev signs the Protocol before the end of 2012, it will become effective on January 1, 2013. Other provisions, such as an article regarding the sale of shares in companies deriving much of their value from real estate, will be enacted as of January 1, 2017.
Due to the Protocol, Russian investors of Cyprus companies stand to qualify for a 9 percent tax exemption. So it comes as no surprise that the Cyprus Investment Promotion Agency predicts Russian investors will flock in droves to invest in Cyprus companies. This will not only strengthen Cyprus’s economy, but give Russian businesspeople the secure investments they are after.