NICOSIA, Aug. 10 (Xinhua) -- Cyprus and Russia have agreed to amend their Double Tax Avoidance Treaty after talks in Moscow on Monday, avoiding a costly rift between the two sides, Cypriot Finance Minister Constantinos Petrides said.

Petrides said on his personal Twitter account that the agreement reassures economic ties between Cyprus and Russia, adding that it was an important and mutually beneficial deal.

Russia had set in motion the process for a unilateral abrogation of the agreement on Aug. 3, saying that counter-proposal submitted by Cyprus did not offer ground for the amendment and renewal of the treaty to avoid double taxation.

Cyprus' Finance Ministry said in a written statement Monday that "the updating of the existing network of double tax agreements in line with international developments is a priority for the Government."

The statement said that the Russian side demanded the amendment of two fundamental articles of the treaty, so as to increase the tax on incomes from dividends and interests from 5 percent to 15 percent.

"The Cyprus side secured, among others, the reduction of the said withholding tax (to nil or 5% as appropriate) of regulated entities, such as pension funds and insurance undertakings as well as listed entities with specific characteristics," the statement said.

It added that exemption from the said withholding tax applies to interest payments from corporate bonds, government bonds and Eurobonds.

The aim of the two sides is for the agreement to be signed this autumn, so that it will come into force on Jan. 1, 2021, said the statement.

The Russian government said that Russians transferred billions of euros in deposits in Cypriot banks over the last few years, continuing a long tradition that started in the 1990s following the collapse of the Soviet Union.

The Russian government estimates that about 27 billion U.S. dollars of corporate earnings flowed from Russia to Cyprus in 2019 alone, the Times of Moscow reported last week.

Russians who found themselves with large amounts of money made Cyprus their favorite investment place. Low corporate taxes aside, Cyprus offered facilities for setting up offshore companies, such as telecommunications and transport connections to most European countries. Enditem

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