Nineteen years have passed since Russia first applied to the
World Trade Organization (WTO). But after Russia's patriarch
Vladimir Putin cleared the final hurdle last week, Russia will
finally join the WTO on August 22nd. It is another milestone in the
transition of the former Soviet Union, and an opportunity for
In 2011, Russia was the world's ninth largest exporter,
shipping $522 billion in goods and $54 billion in services to its
trading partners. Last year, Russians imported $323 billion in
goods and $90 billion in services. Under the agreement with the
WTO, Russia has to lift or reduce many tariffs on these goods and
On average, the final legally binding tariff ceiling for the
Russian Federation will be 7.8% compared with a 20111 average of
10% for all products. More specifically: the average tariff ceiling
for agricultural products will be lowered 2.4 percentage points to
10.8%, and the ceiling average for manufactured goods will be 7.3%
vs. the 9.5% average today on manufactured imports. A detailed
overview can be found on the WTO website.
More importantly, foreign companies will receive market access
to previously restricted sectors. Banking, insurance,
telecommunications, transport & distributions will all be
liberalized August 22nd or in the foreseeable future.
Russia also made commitments on government procurement
arrangements, limiting corporate and agricultural subsidies and
many more specific subjects.
Cyprus is uniquely positioned to benefit from Russia's
liberalization policies. As we wrote in February: Russia imposes a withholding tax
on outgoing dividends to most other countries of 15% and 20% on
interest, but dividends to holding companies in Cyprus are taxed at
a mere 5% (on investments in companies with more than $100.000
share capital). In addition, Cyprus does not tax holding companies
that invest in this way; no corporate tax, no capital gains tax and
no withholding tax if dividends are sent abroad. Neither does it
have stringent thin capitalization rules or minimal interest
requirements that could undermine the benefits just mentioned.
We have seen a steady increase in Russian clients and
Non-Russian clients who invest into Russia. Moreover, any
entrepreneur investing in Russia without using Cyprus would be
shooting himself in the foot. Contact us today if you'd like to
know more about these benefits.
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