Currently the Russian tax law determines that capital gain derived from the disposal of the shares of a Russian company realized by a foreign company and more than 50% of the Russian company's assets consists of real estate located in Russia, is subject to 20% Russian withholding tax at source.

The Russia-Cyprus tax treaty provides tax exemption from Russian tax in case the foreign holding company is Russian.

The amendment of the treaty cancels the exemption and as a result, from 1 January 2015 (if the amendment comes into force in 2010) capital gain derived from the disposal of shares as described above, shall be subject to withholding tax at a 20% rate.

It is recommended to use the transition period for analyzing and considering alternatives which could minimize the impact of the above described amendment.