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Liquidation Payments To Non-resident Shareholders Regarded As Dividends


In Letter #03-08-05 dated March 31, 2010, the Ministry of Finance explains the taxation procedure for settlement payments from the liquidation of a Russian company to shareholder-residents of the Republic of Cyprus.

The Letter states, for the purposes calculating income taxes and capital gains tax under the Double Taxation Agreement between Russia and Cyprus, such settlement payments should be regarded as dividends.

The computation of the income tax base in relation to such income is stated in Point 2, Article 277 of the Tax Code. According to the Code, upon the liquidation of a company and the distribution of said company’s property, the income of the taxpaying shareholders of the liquidated company is based on the market value of the received property minus the actual amount paid for their shares.

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