The Ministry of Finance of the Russian Federation has announced the removal of Cyprus from its ”Black List” with effect from 1 January 2013.

This will have an IMMEDIATE POSITIVE impact on both inbound investment to Russia from Cyprus and outbound investment from Russia to Cyprus and globally.

Importantly:

• With effect from 1 January 2013, dividends paid from Cyprus companies to Russian companies will be exempt from taxation in Russia (subject to the normal holding conditions), benefiting from the Russian participation exemption that does not apply to dividends from countries on the Black List.
• The transactions of Russian companies with Cyprus companies will not be subject to the onerous transfer pricing provisions introduced with effect from 1 January 2013 for countries on the Black List. The standard transfer pricing regulations will continue to apply.
• Other possible Russian provisions being introduced with restrictive implications in respect of payments to companies in jurisdictions on the Black List will not apply to transactions with Cyprus companies.

For more information please contact our tax department.