Investments in Cyprus

Republic of Cyprus

Main article: Republic of Cyprus

2020: Investments from Russia to Cyprus for the first time in history became negative - minus $1.5 billion

Direct investment from Russia to Cyprus in 2020 for the first time in history turned out to be negative - minus $1.5 billion. This means that Russian residents got rid of Cypriot property.

About this write "Vedomosti" with reference to the statistics of the Central Bank of the Russian Federation. The regulator calculates the size of direct investments as the difference between the purchase (deposit) and the sale of financial assets - shares in the authorized capital, bonds, etc. Capital flows in the form of dividends and interest on loans are not reflected in the indicator. The representative of the Central Bank explained to the publication that the Bank of Russia only collects statistics and does not evaluate and analyze direct investment.

Investments from Russia to Cyprus for the first time in history turned out to be negative

For five years until 2020, direct investment from Russia to Cyprus was measured at $9-20 billion per year. In 2019, for example, they amounted to $14.4 billion.

Direct investments are made to further reverse investments in Russian companies. The Cyprus-based company uses its own authorized capital to acquire a stake in a Russian organization, which subsequently returns funds in the opposite direction through dividends or interest. The latter are considered part of the capital outflow. In 2019, according to the Ministry of Finance, more than 1.9 trillion rubles were withdrawn to Cyprus.

This approach has long been possible thanks to the terms of the bilateral double taxation agreement (DIS). It provided for a reduction of the income tax rate on source dividends to five per cent (instead of the standard 15), provided that the recipient was a resident of one of the contracting parties. Interest on loans was not taxed at all at the source. Since this year, the terms of the agreement have been revised at the request of Russian President Vladimir Putin - tax rates at the source for dividends and interest have been raised to 15%.^[1]

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