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Portuguese Ministry of Finance removed Cyprus from “Black List”

Tuesday, November 22, 2011
Following an official decree released on 8 November 2011 the Portuguese Ministry of Finance has removed Cyprus from the “Black List”.

Verdun Group (Cyprus) believe this is a success for Cyprus since it confirms that Cyprus, although a low tax destination, is in full compliance with its EU obligations.

The cooperation of the two states essentially means that nationals (whether legal or physical) of both states shall be able to benefit in tax issues.

Example 1: Any payments made from Portuguese companies to companies in Cyprus shall be treated as tax deductible in Portugal.

Example 2: Cypriot owners of immoveable property in Portugal shall pay a rate of 0.2% -0.8% real estate tax as opposed to the previous rate of 5% at the time when Cyprus was blacklisted.

The Portugues move is a welcoming move for Verdun Group (Cyprus) following Italy's move on removing Cyprus from its black list in 2010.

Russia, Cyprus To Sign Tax Agreement

Monday, September 27, 2010
Russia and Cyprus are due to sign a new double taxation avoidance agreement which should secure Cyprus's removal from the notorious Russian 'blacklist' of jurisdictions which have not demonstrated a sufficient level of cooperation with the Russian tax authorities. The agreement would include extensive exchange of tax information.

On Monday September 27, The Cyprus finance minister, Charilaos Stavrakis, flies to Moscow for a meeting with his Russian counterpart, Russian Deputy Economy Minister Igor Manylov, in order to “verify that the wording of the treaty is to the benefit of both countries,” according to the Cyprus Mail.

The two countries had initialed a revised double taxation agreement back in April 2009, and the document may finally be signed during a visit to the island by President Dmitry Medvedev in early October.

In 2008 Russia added Cyprus to a 'blacklist' of 54 countries, on the grounds that it was an ‘uncooperative territory’. This blacklist was part of an amendment to the Russian tax code which introduced a tax exemption on the repatriation of dividends from foreign subsidiaries of Russian companies, specifically excluding Russian subsidiaries based in territories and countries on the so-called blacklist.

Many European countries such as Ireland, Luxembourg and Switzerland successfully lobbied the Russian government to be removed from the blacklist, but Cyprus remained on the list due to its apparent failure in the past to fulfill requests for information from the Russian tax authorities.

Cyprus has long been in the lead in terms of investments in Russia, which, according to Vedomosti, reached USD3.12bn in the first six months of 2010 (although down on the peak year 2008 at USD56.9bn).

Italy removed Malta and Cyprus from the black list

Tuesday, August 10, 2010
By way of a ministerial decree issued on July 27, 2010 Italy removed Malta and Cyprus from the black list for the purposes of the application of Italian controlled foreign company rules and provisions on tax residency of individuals.

As a result of the removal, Italian owned foreign companies established in Malta and Cyprus are no longer subject to Italian CFC rules, and Italian individuals who move to Malta or Cyprus are no longer presumed to be resident in Italy for tax purposes unless they prove the contrary (the burden to prove that the move is fictitious and tax residency remained in Italy is upon the tax administration).

Finally, Cyprus has been inserted in the white list for the purposes of the application of the portfolio income exemption exempting foreign source portfolio investment income from Italian 12.5 percent withholding or substituted tax.    

Following this decision, foreign investments and holdings held through a Maltese or Cypriot subsidiary of an Italian parent company, will only be subject to taxation in the country of the subsidiary, which is substantially lower than in Italy. By utilizing the EU Parent - Subsidiary Directive, profits can be distributed to the Italian holding company (parent company) free of any withholding tax. By this decision Malta and Cyprus have become very favorable tools to utilize for Italian companies as well as individuals from an international tax point of view.