Medvedev’s visit to Cyprus: 15 agreements signed, including the amendment to the agreement of avoidance of double taxation

For the first time in 50 years the Russian President pays an official visit to the Republic of Cyprus. In Cyprus, on the 7th of October Dmitrij Medvedev signed 15 agreements and awarded his namesake President of Cyprus Dmitris Christofias the Order of People?s Friendship. From year 1960 – the moment when Cyprus obtained independence and till the collapse of the Soviet Union, Soviet heads didn’t visit the Island. Of course, in the first years of its independent development the things didn’t go so good in Cyprus. Apart from splendid ecology, perfect climate and the clean sea the Island didn’t have anything: no oil, no gas, no forests, and no other natural resources. Moreover, Cyprus was occupied by Turkey that still holds 37% of its territory placing in the north of the island a thirty-five thousand military contingent. However, thanks to the friend, including the Russians and to hard work of the inhabitants of this island, during the last 50 years the Republic of Cyprus has become a successful state. Cyprus has not only survived but also has occupied a dignified place in the family of European peoples. Having joined 7 years ago the European Union, the Republic of Cyprus occupies the 6th place by living standards in the EU, successfully develops such traditional spheres of economy as maritime transporting, tourism, construction, finances and services. By the way, the financial sector gives about 70% of GDP. Since joining the EU, the Cyprians carefully fulfills all the requirements of all European financial institutes and that is why long time ago they are excluded from the “black” and “grey” lists”. And the very word “offshore” has become inapplicable to this Mediterranean state and Cyprian international companies. According to the latest ratings of international fiscal institutions and Organization for Economic Cooperation and Development (OECD), the Republic of Cyprus is in the fourth dozen in the rating of countries of the world (Russia is on the 120th place). That is why during the speeches at the business Forum in Nicosia where Mr. Medvedev and Mr. Khristofias participated, they spoke much on the necessity in the exchange of experience between financial institutions of Cyprus and Russia that wants to convert Moscow in a large international financial center. Evgenij Primakov, the President of Russian Chamber of Commerce noting in his speech the experience of the Cyprians in the bank and financial service sector, informed that the Republic of Cyprus invested $52 billions in the Russian economy by year 2010. According to him, the 15 agreements signed by Mr. Medvedev in Cyprus “give a new impulse to the development of bilateral cooperation, including Russian regions; allow activating cooperation in the sphere of arbitration proceedings, to cooperate in the sphere of exhibitions and information”.

Russian Partner of PriceWaterhouse & Coopers Vladimir Vinogradov spoke on the prospects of cooperation with Cyprus at Russian-Cyprian Forum organized by the Cyprian Chamber of Commerce. He underlined that Cyprus being one of the largest investors to the economy of Cyprus has a very attractive taxation: 15% is VAT, 10% is a tax rate from the companies’ benefits and 0% is a tax rate on securities. It is interesting to note that every fifth dollar invested in the Russian economy came from Cyprus. It is clear, that they are basically reinvestments, not only direct investments of the Cyprians. But recent years this process has activated as all Cyprian assets make 145 billions of dollars and 20% go to the Russian investments. As it was noted by President of Russian Banks Association Garegin Tosunyan, “reinvestments mean mutual trust and mutual interest”. Recently large Cyprian private structures that belong to the recognized local businessmen have also been investing in Russia; Cyprian banks also actively work in Russia. In particular, Cyprian Marfin Popular Bank works through Rosprombank, Cyprian Bank of Cyprus works through bought by it Uniastrum Bank, etc.. According to many specialists, nowadays to give more impulse to Russian-Cyprian relations, the countries lack bright huge investments projects, and to fulfill them a large joint export-import bank is needed. Besides, many observers consider that Russian governmental structures could use more actively the financial potential of Cyprus for international movement of capital, in particular in commerce and fulfillment of large projects on the countries of North Africa and other Mediterranean states- In some speeches it was noted that “Cyprus plays the same role for Russia as Hong Kong for China”. Such comparison may seem strange as Hong Kong is the territory that belongs to China and the republic of Cyprus is universally recognized independent state. But that makes the relations with the republic of Cyprus to be special that was confirmed during the visit of Mr. Medvedev. The present-day Cyprus using its membership in the EU is ready to contribute to the strengthening of Russian relations with Europe, to lobby Russian projects on the European continent.

During the Forum in Nicosia Cyprian Minister of Finance Kharilaos Stavrakis spoke on the country’s economy and the potential of the new edition of Agreement on avoidance of Double Taxation signed during the visit of Mr. Medvedev to Cyprus. “Cyprian economy is open. Today its increase makes 1.8-2.5%. of course, we were affected by international financial crisis but it didn’t affect us as hard as others. There are several reasons. Our bank sector is very conservative and has never been fond of so called “toxic bank products”. Besides, we have an ideal legal and audit system, we are the EU members and we have the lowest tax rates in Europe. With Russia we signed a great agreement on taxes, kept our positions and moreover with the Russian colleagues we will use additional advantages from this Agreement. It goes without saying that Cyprus as the greatest investor in the Russian economy will continue attracting investments for the benefit of bilateral cooperation and development”.

The agreements signed in Nicosia, friendly atmosphere of negotiations and the readiness of both countries for searching and finding mutually beneficial solutions, in the end of the Russian-Cyprian Forum allowed Dmitrij Medvedev underlining that there was mutual understanding in all questions.