Russian Businessmen and Cyprus
Why Russian Businessmen prefer Cyprus to set up Offshore Company: Increased number of investors flocked Cyprus after news of the ratification of the Protocol to the 1998 Double Tax Treaty Agreement of Russia and Cyprus was reported to finally be completed at the end of this year and will be effective on January 1, 2013. In this regard, the relationship between the two countries has been sealed as Cyprus’ position as the primary international partner of Russia was given full assurance.
With the ratification being close to completion, Russia has also removed Cyprus from its list of blacklisted offshore destinations. Therefore, Russian companies can once again enjoy the low corporate tax and zero dividend tax rate offered by the Cypriot Government. The agreement removed fears that a cancellation of the existing treaty between the two countries will end; thus, more Russian investors prefer Cyprus as a haven for their Offshore Company.
Cyprus: Main Beneficiary of Russian Investment
Amidst the pending ratification, many Russian investors still considered the Cypriot Government as the ideal haven for their International Business Companies. It may have felt an all-time low of $8.8 billion in the year 2008, but the investments pouring into the country has since increased providing an incoming cash flow of $9.7 billion in the year 2009, $18 billion in the year 2010, and $18.2 billion in the year 2011 and with the breaking news of the Double Tax Treaty ratification, Cyprus expects that these investments will further increase or even double by the year 2013, especially after the discovery of the Aphrodite Gas Field.
At present, an estimated 20% of Russian sources has placed funds in Cyprus, which is considerably higher compared to investments poured into other countries, including their homeland, Russia. These are evidence of the strong confidence these Russian business people have for the Cyprus Government. Nevertheless, these built confidence may also rest on the tax incentives Cyprus has laid down for those who will consider it as the home base of their international companies because if one will look at practicality, then dealing business with Cyprus is often times simpler, more convenient and more profitable.
Amendments to the Double Taxation Treaty between Cyprus and Russia
In compliance with the Organization for Economic Co-operation and Development (OECD) model, certain amendments have to be implemented in the existing Double Taxation Treaty between Cyprus and Russia. One of which involves the tax rate applied to immovable property as well as the treatment of the sale of shares of a company in a specific country.
In the past, taxation can only be applied to the country where shares are owned and is not to be charged a second time where the shares have been actively trading and creating revenues. Under the revised DTT of Cyprus and Russia, taxing rights are also awarded to the country where the 50% of the property is located. With this, investors seeking to runaway from their home country tax obligations could be avoided.
As more companies gain interest in setting-up an offshore company in Cyprus, many corporate and legal firms have already hired more certified and licensed Cypriot lawyers and accountants to assist interested clients. With a pool of highly educated and well-skilled labor force, Cyprus is ready to cater to the needs of its potential investors anytime of the day. It maintains its prestige of offering high quality services and is committed to stick to this principle for better business relationships with foreign investors, not only from Russia but also from elsewhere in the world.