Double taxation treaties

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.