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Cyprus-Russia Tax Treaty Update: Amendment concerning the taxation of gains deriving from the alienation of property postponed

The Republic of Cyprus and the Russian Federation have signed a Protocol on 7 October 2010 amending certain articles in the Cyprus-Russia Double Tax Treaty (“the Treaty”).

Article VII of the Protocol, would amend Article 13 of the Treaty so that gains derived from a resident of a contracting state from the alienation of shares, deriving more than 50% of their value from immovable property situated in the other contracting state, would be taxed in that other state (excluding gains in the course of corporate reorganizations, from listing of shares on a registered stock exchange or by a pensions fund and provident funds) with effect as from 01 January 2017.

Hence, after that date (01 January 2017) income of a Cypriot company from the alienation of shares of a Russian company owning Russian immovable property would be taxed in Russia.

On 29 December 2016 however, Cyprus and Russia have agreed to postpone the application of Article VII of the Protocol which would apply as from 1 January 2017.

As the Cyprus Ministry of Finance has announced on 29 December 2016, an additional Protocol is in parallel being finalised, providing for the application of the revised provisions of Article 13 of the Treaty, until similar provisions are introduced in other bilateral Agreements for the Avoidance of Double Taxation between the Russian Federation and other European countries.

Hence, Article 13 of the Treaty currently -until amended- provides that gains derived by a resident of a contracting state from the alienation of:

  1. Immovable property situated in the other contracting state may be taxed in that other state;
  2. Movable property forming part of a permanent establishment which an enterprise of a contracting state has in the other contracting state
  3. Movable property pertaining to a fixed base available to a resident of a state in the other state for the purpose of performing independent personal services may be taxed in that other state.
  4. Ships, aircrafts or road vehicles operated in international traffic or movable property pertaining to such operation shall be taxable only in the contracting state of which the alienator is a resident.


A.I.Kitsios LLC
30 December 2016

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