Double taxation treaties

In this section of the Tax chapter of Doing business in Russia, we outline general principles of double taxation treaties (“DTTs”) and give examples of the tax rates applicable under several DTTs to which Russia is a signatory.

General remarks

DTTs exist between many countries on a bilateral basis in order to prevent double taxation, i.e. taxation which is levied twice on the same income, profit, capital gain, inheritance or other item. The treaties generally guarantee non-discriminatory tax treatment and provide for cooperation between the tax authorities of the respective signatory countries.

Tax treaties signed by Russia are usually based on the OECD Model Treaty and the United Nations Model Convention. The provisions of these treaties override Russian domestic law. 

The table below contains the tax rates applicable under several DTTs to which Russia is a signatory. The rates apply to withholding taxes on Russian sourced income. 

Foreign companies wishing to obtain benefits under DTTs must provide Russian tax agents with a statement on beneficial ownership and a tax residency certificate. The look-through approach can be applicable to the payment of passive income in any forms (dividends, royalties or interest). 

Recent developments

In 2020, as a radical measure to combat capital withdrawal to low-tax jurisdictions, Russia initiated the revision of the withholding income tax rates on dividends and interest under DTTs with certain states. As a result of negotiations with Cyprus, Luxembourg and Malta, withholding tax rate on dividends and interest under DTTs with these states was increased to a maximum of 15%. Similar negotiations have already started with the Netherlands.

On 1 January 2021, amendments to the DTTs with Cyprus and Malta came into force, while those to the DTT with Luxembourg are expected to be fully ratified in 2022. 

Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “MLI”)

The MLI is an OECD convention that updates DTTs to counteract tax avoidance and attempts by taxpayers to receive unjustified tax benefits. 

As of 1 October 2019, amendments to local tax legislation required by the MLI that Russia signed in 2017 came into force. In 2020, Russia completed all necessary formalities for MLI implementation to DTTs with more than 30 states. For example, starting from 2021, Russia will adjust DTTs with Austria, Belgium, Cyprus, France, Ireland, Luxembourg, the Netherlands, Singapore, South Korea and the United Kingdom.

It is planned that upon final ratification of the MLI, Russia will in total update DTTs with more than 70 states. 

Mutual agreement procedure (the “MAP”)

In 2019, the Tax Code was amended in line with the minimum standard of the dispute resolution mechanism proposed by the OECD.

The MAP is now in place to resolve disputes on taxation of income, profits and property of the person under the applicable DTT.

Specific aspects of the MAP depend on the other state involved in the dispute with Russia. They should be determined with reference to the provisions of the relevant DTT.

CountryDividendsInterestRoyalties
Austria
 
5 or 15% (1) 5% for shareholdings of 10% or more, otherwise 15% 0%

0%

Belgium10%0 or 10% (2) 0% for bank loans or loans granted (or guaranteed) by a contracting state, otherwise 10% 0%
Canada10 or 15% (3) 10% for shareholdings of 10% or more, otherwise 15% 10%0 or 10% (4) 0% for (i) copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or other artistic work; (ii) royalties for the use of computer software; or (iii) royalties for the use of patents where the payer and the beneficial owner of the royalties are not related persons, otherwise 10%
China5 or 10% (5) 5% for shareholdings of 25% or more, provided the investment is at least EUR 80,000, otherwise 10% 0% 6%
Cyprus5 or 15% 5 or 15% (6) 5% if the income recipient qualifies as a publicly-listed company meeting certain participation criteria: (i) at least 15% of the shares of the receiving company are freely traded on a registered stock exchange; and (ii) the receiving company holds (for not less than 365 days) at least 15% of the shares in the company paying out the dividends or interest. Apart from that, 5% will apply to dividend or interest payments made to public units such as insurance institutions, pension funds, state bodies and central banks  0%
France5, 10 or 15% (7) 5% if the investment is not less than EUR 76,225 and if the recipient pays tax; 10% if only one of these two circumstances applies; otherwise 15% 0%0%
Germany5 or 15% (8)  5% for shareholdings of 10% or more, provided the investment is at least EUR 80,000, otherwise 15% 0%0%
Hong Kong5 or 10% (9) 5% for shareholdings of 15% or more, otherwise 10% 0%3%
Ireland10%0%0%
Italy5 or 10% (10) 5% for shareholdings of 10% or more, provided the investment is at least USD 100,000, otherwise 10% 10%0%
Japan5 or 10% (11) 5% for shareholdings of 15% held for more than 365 days, otherwise 10% 10%0% 
Korea (South)5 or 10% (12)  5% for shareholdings of 30% or more, provided the investment is at least USD 100,000, otherwise 10% 0%5%
Luxembourg5 or 15% (13)  5% for shareholdings of 10% or more, provided the investment is at least EUR 80,000, otherwise 15% 0%0%
Malta5 or 15% (14) 5% if the income recipient qualifies as a publicly-listed company meeting certain participation criteria: (i) at least 15% of the shares of the receiving company are freely traded on a registered stock exchange; and (ii) the receiving company holds (for not less than 365 days) at least 15% of the shares in the company paying out the dividends or interest. Apart from that, 5% will apply to dividend or interest payments made to public units such as insurance institutions, pension funds, state bodies and central banks 5 or 15% (14)5%
Netherlands5 or 15% (15)  5% for shareholdings of 25% or more, provided the investment is at least EUR 75,000, otherwise 15% 0%0%
Singapore0, 5 or 10% (16) 0% for government and state institutions, 5% for shareholdings of 15% or more, otherwise 10% 0%5%
Spain5, 10 or 15% (17)  5% for shareholdings of at least EUR 100,000 and if the dividends are exempt from tax; 10% if either condition is met; otherwise 15% 0 or 5% (18)  0% if the actual recipient of interest is the government of the other contracting state, or for long-term bank loans (exceeding seven years); otherwise 5% 5%
Switzerland5 or 15% (19) 5% for shareholdings of 20% or more, if the investment is at least CHF 200,000; otherwise 15%  0%0%
Ukraine5 or 15% (20)  5% for shareholdings of at least USD 50,000; otherwise 15% 10%10%
UK10%0%0%
USA5 or 10% (21) 5% for shareholdings of 10% or more, otherwise 10%  0%0%

Expertise

Key contacts

Dominique Tissot
Partner
Head of Tax | Head of Energy Efficiency & Renewables
T +7 495 786 30 88
Hayk Safaryan
Partner
Head of Customs
Moscow
T +7 495 786 30 59

Contents

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  • Common forms of business structures for foreign investors
  • Anti-monopoly issues
  • Contracts
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