SUKHUM, May 7. /TASS/. An agreement between the governments of the Republic of Abkhazia and Russia on avoiding double taxation and preventing the evasion of paying tax on capital gains have been signed in Sukhum, a TASS correspondent reports from the signing ceremony.
The document was signed by Vice Premier, Finance Minister of Abkhazia Vladimir Delba and Deputy Finance Minister of Russia Alexey Sazanov.
"This is a landmark event, a long and fruitful journey led up to the double taxation agreement. The agreement signed will boost the development of our relations, the relations between tax systems, and bring a good amount of money into Abkhazia’s economy. The key goal is to improve the prosperity of our citizens, develop the economy and the country overall," Delba said at the signing ceremony.
Sazanov also expressed confidence that conclusion of the intergovernmental agreement is an important stage of development of bilateral economic relations. "I am convinced that the agreement will serve as a foundation and impetus for further cooperation and investment in the area of trade and, of course, tourism. Together we managed to reach a balance between the two countries in developing the agreement, it meets modern trends in the field of international taxation and facilitates fair investment practices," Russian deputy finance minister said.
The Russian finance ministry noted that the agreement sets a single tax rate in the state - source on profit as dividends and royalties in the amount of 10%. The tax rate on interest income will be 0%, which will allow not taxing in the state - source the interest paid on loans provided by the other contracting state. Consequently, taxes on such interest will be paid to the government of the state that provided the borrowed funds.
Moreover, the agreement stipulates exempting developers from paying capital gains taxes in the country where the construction is underway, for a subsidized period of 18 months, during which the activities of one state’s company on the territory of the other will not lead to formation of a permanent representative office. During this subsidized period tax will only be paid in the residence country, the ministry added.
The agreement will come into force in 2025 after it is ratified by Abkhazia and Russia.
After the signing of the agreement President of Abkhazia Aslan Bzhania received Russian Deputy Finance Minister Alexey Sazanov. "Abkhazia has expected the signing of such an important document for a long time. This agreement opens up new possibilities for development of our economy to make sure Russian investment flows to us even faster," Bzhania was quoted as saying. The president expressed confidence that the agreement would facilitate even stronger enhancement of friendly relations between the Republic of Abkhazia and the Russian Federation.
The document is set to attract major investment in Abkhazia’s economy, mainly in the tourist sector, Sazanov stressed. "There is such an interest from the side of Russian investors, and they have repeatedly demonstrated it to us," he said.
Delba who was present at the meeting noted that "the agreement will provide an opportunity, to the Abkhaz business in particular, to avoid double taxation," adding that the document is aimed at facilitating stable economic development of both countries and preventing tax risks for business.