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Easing restrictions on Double Taxation Treaty

2024-01-09 11:46 Legal Digest News
Amendments have entered into force in#nbsp;the Tax Code of#nbsp;the Russian Federation to#nbsp;mitigate the consequences of#nbsp;the suspension of#nbsp;double taxation avoidance agreements with foreign countries.

The amendments introduced mitigate the consequences of#nbsp;double taxation avoidance agreements (DTA) with foreign residents of#nbsp;countries that commit unfriendly actions towards the Russian Federation and its legal entities. The relaxations include:

  • Benefits for certain types of#nbsp;income, which include a#nbsp;zero tax rate, exemption from withholding tax from the source, or#nbsp;reduced rates. These changes apply to#nbsp;income paid from August 8, 2023.
  • Simplified requirements for income in#nbsp;the form of#nbsp;royalties, which area applied to#nbsp;intellectual property used by#nbsp;TV channels and objects of#nbsp;copyright, related, patent rights, know-how.

There are no#nbsp;requirements for these incomes by#nbsp;the date of#nbsp;conclusion of#nbsp;the contract#nbsp;— the benefit for them is#nbsp;also applicable if#nbsp;the contract was concluded after the suspension of#nbsp;the provisions of#nbsp;the DTA.

  • Benefits in#nbsp;the transport sector, which apply to#nbsp;income from leasing aircraft and ships, as#nbsp;well as#nbsp;international transportation. The relaxations are applied to#nbsp;contracts that are also concluded after the suspension of#nbsp;the DTA.
  • Benefits on#nbsp;interest paid to#nbsp;foreign banks and export credit agencies under contracts concluded before the suspension of#nbsp;the DTA.

The relaxations are valid until 2025 and apply when the company is#nbsp;able to#nbsp;confirm its tax residency and actual income generation in#nbsp;the country with which the suspended agreement was concluded. At#nbsp;the same time, the relaxations are not applied to#nbsp;transactions with related parties.

These changes are related to#nbsp;the effect of#nbsp;the Presidential Decree, which suspended a#nbsp;number of#nbsp;provisions of#nbsp;the treaty with "unfriendly" countries, for example: income from real estate, dividends, interest, royalties, capital, other income and so#nbsp;on.

But despite this, some articles have not stopped working yet. We#nbsp;are talking about articles:

  • elimination of#nbsp;double taxation
  • mutual agreement procedure
  • information exchange
  • employees of#nbsp;diplomatic and consular institutions.

In#nbsp;the matters of#nbsp;the use of#nbsp;DTA and transactions with foreign companies, please contact Acsour experts.