Russia and Cyprus are due to sign a new double taxation avoidance agreement which should secure Cyprus's removal from the notorious Russian 'blacklist' of jurisdictions which have not demonstrated a sufficient level of cooperation with the Russian tax authorities. The agreement would include extensive exchange of tax information.
On Monday September 27, The Cyprus finance minister, Charilaos Stavrakis, flies to Moscow for a meeting with his Russian counterpart, Russian Deputy Economy Minister Igor Manylov, in order to “verify that the wording of the treaty is to the benefit of both countries,” according to the Cyprus Mail.
The two countries had initialed a revised double taxation agreement back in April 2009, and the document may finally be signed during a visit to the island by President Dmitry Medvedev in early October.
In 2008 Russia added Cyprus to a 'blacklist' of 54 countries, on the grounds that it was an ‘uncooperative territory’. This blacklist was part of an amendment to the Russian tax code which introduced a tax exemption on the repatriation of dividends from foreign subsidiaries of Russian companies, specifically excluding Russian subsidiaries based in territories and countries on the so-called blacklist.
Many European countries such as Ireland, Luxembourg and Switzerland successfully lobbied the Russian government to be removed from the blacklist, but Cyprus remained on the list due to its apparent failure in the past to fulfill requests for information from the Russian tax authorities.
Cyprus has long been in the lead in terms of investments in Russia, which, according to Vedomosti, reached USD3.12bn in the first six months of 2010 (although down on the peak year 2008 at USD56.9bn).