Initiative to suspend double tax treaties

23.03.2023

On 15 March 2023, the Russian Ministry of Foreign Affairs and the Ministry of Finance proposed an initiative to suspend double tax treaties (hereinafter - “DTTs") with "unfriendly" countries. At the moment, it is not clear what kind of DTTs they are referring to, the terms of such suspension, and the ways to eliminate legal contradictions caused by the fact that the mechanism for suspending DTTs has not been legally regulated.

Possible consequences

The complete termination of DTTs is not under discussion. At least, the Russian side has not indicated such an intention.

Nevertheless, with the suspension of DTTs, preferential rates and exemptions will cease to apply: payments of "passive income" will be subject to withholding tax, using the rates stipulated by Russian law, namely 15% for dividends, 20% for interest and royalties.

How we can help

Currently, it is difficult to anticipate the list of possible restrictions, so we will continue to monitor this situation. We are also ready to advise you on the application of DTTs, including how to prove actual entitlement to income, as well as to consult you on other tax and legal issues.