MIL OSI Translation. Region: Russian Federation –
The Government is working on adjusting agreements with foreign partners following the President’s instruction.
The Government has approved a draft protocol on amendments to the Double Taxation Agreement with Luxembourg. The protocol increases taxes on dividends and interest in favour of Russia for Russian companies operating in Luxembourg to 15 percent. The directive was signed by Prime Minister Mikhail Mishustin.
The revision of contracts with foreign partners is being carried out following the instruction of President Vladimir Putin. In his address to the nation in March 2020, the President pointed out the unfairness of taxation of companies in offshore jurisdictions at rates below personal income tax in Russia. The President ordered to adjust DTA agreements with such countries to ensure that income such as interest and dividends paid abroad would be taxed at the same rates as in Russia, which is 15 percent.
The protocol approved by Mikhail Mishustin includes a list of exemptions, that will be entitled to a preferential 5 percent tax on interest and dividends.
The preferential taxation will apply to institutional investments, as well as to public companies with at least 15 percent of shares in free float and holding at least 15 percent of the share capital in the company paying the said income during the year. The exemptions will also apply to such companies’ income earned from interest on bank loans, on outstanding Eurobond loans, as well as on bonds of governments, central banks, pension funds and insurance companies from the countries participating in the agreement.
The exemptions are applied to taxpayers that pose no risk of using foreign jurisdictions for tax evasion purposes.
The Ministry of Finance was instructed to negotiate with the Luxembourg side and to ensure the signing of the protocol on amendments to the Double Taxation Agreement with that country.
Earlier, Russia signed similar documents with Cyprus and Malta.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and or sentence structure not be perfect.