Double Taxation Agreement between Cyprus and Russia: What You Need to Know
The Double Taxation Agreement (DTA) between Cyprus and Russia is an agreement that aims to avoid the double taxation of income and capital gains that may occur due to the overlapping tax jurisdictions of both countries. This agreement was signed on 7 October 1998 and has been in force since 1 January 2000. The DTA applies to individuals and companies who are residents of Cyprus and Russia and who derive income from sources in the two countries.
The following are some key aspects of the DTA between Cyprus and Russia that you need to know:
1. Tax Treatments
The DTA specifies the tax treatments for different types of income and capital gains. For instance, dividends, interest, and royalties are subject to a maximum withholding tax rate of 5% in the source country (i.e. where the income is derived). On the other hand, capital gains from the sale of immovable property are taxable in the country where the property is situated.
2. Residence Status
The DTA defines the criteria for determining the residence status of individuals and companies. For instance, an individual is considered a resident of a country if he/she spends more than 183 days in a tax year or has a permanent home in that country. A company is considered a resident of a country if it is incorporated in that country or has its management and control there.
3. Treaty Shopping
The DTA also contains provisions aimed at preventing treaty shopping, which is a practice whereby residents of third countries use the DTA to avoid or reduce their tax liabilities. For instance, the DTA specifies that a company cannot claim the benefits of the DTA if its main purpose is to take advantage of the treaty.
4. Mutual Agreement Procedure
The DTA includes a Mutual Agreement Procedure (MAP) that allows the competent authorities of Cyprus and Russia to resolve disputes arising from the interpretation and application of the DTA. The MAP is a process whereby the competent authorities of both countries discuss and negotiate to reach an agreement on the tax treatment of a particular transaction or situation.
The Double Taxation Agreement between Cyprus and Russia is an important agreement that provides clarity and certainty to individuals and companies who derive income from sources in both countries. By avoiding the double taxation of income and capital gains, the DTA promotes cross-border trade and investment and strengthens the economic ties between Cyprus and Russia. As a professional, it is important to understand the key aspects of this agreement to be able to communicate its implications effectively.