As per the protocol concluded back in 2010 amending the Cyprus-Russia double tax treaty, Article 13 provided the right to the Contracting States to tax capital gains from the sale of shares or other similar rights deriving more than 50% of their value from immovable property situated in their own territory. These provisions would have come into effect as from 1 January 2017 onwards.
We have been notified by the Cyprus Ministry of Finance that the above-mentioned Article will not come into effect on 1 January 2017 following an agreement reached between the Cyprus and Russian Authorities. More specifically, the application of the provisions of Article 13 have been postponed to be applied when similar provisions are introduced in other bilateral tax treaties concluded by the Russian Federation and other European countries.
Based on the above, Cyprus remains an attractive jurisdiction for the capital gains realized from the sale of shares in Russian entities. We remain at your full disposal to provide any structuring advice for the use of Cyprus Holding SPVs in such operations.