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Private client practitioners often ask why Cyprus, being one of the smallest countries in Europe, consistently ranks amongst Russia’s largest foreign investor countries as well as amongst the largest recipients of Russian investments.
In 2008 alone €2 billion was transferred by foreign investors out of Russia into Cyprus. As much as 18% of all foreign direct investment into Russia in 2006 originated from Cyprus. Why, therefore, are Cyprus companies routinely being used as investment vehicles for investment into Russia?
Although historically Russia and Cyprus have always been affiliated due to the shared religion and their common cultural heritage stretching back to the Byzantine Empire, since the early 1990s, mutual economic interests appear to prevail over shared religious and cultural convictions.
This article outlines the favourable tax position for foreign investors as the main factor which has influenced the establishment of this special economic relationship and briefly addresses the question of whether Cyprus’ domestic taxation regime complies with international standards of regulation.
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From Cyprus With Love: Investing in Russia through Cyprus