The Protocol to the Russia-Cyprus double tax agreement, which was initialled in 2009, was approved by the Russian Prime Minister in September 2010 and signed by the Russian President during his visit to Cyprus the following month. It will take effect once it has been ratified by both countries and notifications of ratification have been exchanged. We understand that the protocol has now been submitted to the Russian State Duma for ratification. No official announcements have been made regarding the timetable but it is understood that the aim is for ratification procedures to be completed before the end of the year so that the Protocol will enter into effect from the beginning of 2012. Certain provisions of the Protocol relating to taxation of real estate and disposal of interests in property-rich companies will enter into force four years later.
The exchange of instruments of ratification should lead to formal removal of Cyprus from the Russian Finance Ministry's List of States and Territories Which Grant Preferential Tax Treatment and do not Require the Disclosure and Provision of Information in Relation to Financial Operations Carried Out (commonly known as the blacklist). This will enable dividends paid by Cyprus companies to qualify for tax exemption in Russia.
Negotiations on the Protocol have continued since signature of the draft and a number of detailed changes have been proposed. The outcome of the negotiations and the final text of the Protocol will not be known until ratification is complete. We shall issue a full analysis of the final agreed Protocol as soon as it is published.
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