Source: Russian Federation Government
Prime Minister Mikhail Mishustin signed a directive to approve the protocol on amending the Convention for the avoidance of double taxation in force between Russia and Malta. The draft federal law on the ratification of the protocol will be submitted to the State Duma soon. After approval by the lower chamber of the parliament, it will be reviewed by the Federation Council and approved by the President.
Russia and Malta signed a protocol on amending the Convention for the avoidance of double taxation in early October 2020. It provides for an increase in the tax withholding rate to 15% on dividends and interest.
The protocol provides for a number of exceptions, according to which a preferential tax rate of no more than 5% will be applied to revenue in the form of dividends and interest. Exceptions will apply to institutional investments. They are also provided for public companies, at least 15% of the shares of which are in free circulation, and which own at least 15% of the capital of the company paying the above revenue during the year.
The exceptions are due to the absence of the risk of such taxpayers using foreign jurisdictions for tax evasion.
The revision of treaties with foreign partners is being carried out as part of President Putin’s instructions. In his address to the nation in March 2020, he pointed to inequitable taxation of corporate revenue from offshore jurisdictions at rates that are below personal income tax. The President ordered the adjustment of the agreements with such countries so that the revenue paid abroad in the form of interest and dividends is taxed at the same rates as in Russia, that is, 15%.