Prime
Minister Mikhail Mishustin approved the protocol on amending the agreement on
the avoidance of double taxation currently in force between Russia and Luxembourg. The draft federal law
on ratifying the protocol will be submitted to the State Duma shortly. After it
passes, it will be reviewed by the Federation Council and signed by the
President.
Russia and Luxembourg
signed a protocol on amending the agreement on the avoidance of double taxation
in early November 2020. It provides for increasing the tax withholding rate to
15 percent on dividends and interest.
The
protocol identifies a number of exceptions, according to which a preferential
tax rate of 5 percent or less will apply to capital gains in the form of
dividends or interest. The exceptions will apply to institutional investment
and public companies, at least 15 percent of whose shares are in free circulation
and which own at least 15 percent of the capital of a company that is paying
the above capital gains during the year.
The
amendments to the agreement will not affect the interest paid on Eurobond
loans, bond issues of Russian companies and loans issued by foreign banks.
The
agreements with foreign partners are being revised as part of President Putin’s
instructions. In his address to the nation in March 2020, the President focused
on unfair taxation of corporate revenue in offshore jurisdictions at rates
below the personal income tax rate. The President ordered adjustments to
agreements with such countries so that interest and dividends that are paid
abroad are taxed at the same 15 percent rate as in Russia.
