UPDATE 2: Russia to break deal on avoidance of double taxation with Cyprus

(Adds comment in last paragraph)

MOSCOW/ATHENS, Aug 3 (PRIME) -- Russia has started the procedure to cancel an agreement on avoidance of double taxation with Cyprus, the Finance Ministry said in a statement on Monday.

"In order to fulfill the presidential order to levy a tax at a rate of 15% on yield in form of dividends and interest paid from the Russian Federation territory to the Republic of Cyprus, the Finance Ministry starts the procedure of denunciation of the agreement on August 3," the ministry said.

Russian President Vladimir Putin suggested in March imposing a 15% tax on dividend yield withdrawn to accounts in foreign jurisdictions, which would require adjustments in agreements with other countries on avoidance of double taxation. Russia will cancel such deals unilaterally if agreements on the matter with other countries are not reached, he also said.

The Finance Ministry said that during negotiations Cyprus set conditions that the Russian ministry saw as diluting the effect of Russian measures. According to the ministry, about 1.4 trillion rubles of Russians' income was withdrawn to Cyprus in 2018 and more than 1.9 trillion rubles in 2019.

The Cypriot Finance Ministry said that it has not received a notification of Russia's decision to break the deal.

"We are completely unaware of the plans to break the agreement. We are waiting. I think, there are no reasons to cancel the agreement. We had exchanged letters and are optimistic," an official of the ministry said, adding that the cancellation of the deal would lead to negative consequences for both countries.

Sergei Zheleznyak, member of the foreign affairs committee at the State Duma, the parliament's lower house, told PRIME that Russia can denounce deals with other low-tax countries after Cyprus. The revision of tax deals will promote the change of jurisdiction by Russian businessmen to domestic low-tax zones, he also said.

(73.4261 – U.S. $1)

End