The Russian Ministry of Finance recently published Letter No. 03-08-05/6035 concerning the taxation of income paid by a Russian entity to its sole Cyprus shareholder in connection with the reduction of the entity's additional paid-in capital formed from the shareholder's investment. The letter clarifies that under the Russian Tax Code, income paid to a sole shareholder due to a reduction of additional paid-in capital would be considered taxable income in Russia, but where a tax treaty is in force, the provisions of the tax treaty apply. The letter states that under the 1998 Cyprus-Russia tax treaty, such income would not...