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Suspension of the main provisions of the DTTs with “unfriendly” states

DATE: August 15, 2023 | AUTHOR: AT

On August 8, the Presidential Decree No. 585 “On the suspension by the Russian Federation of certain provisions of international tax treaties of the Russian Federation” was published. This Decree suspends the main clauses of the double tax treaties (hereinafter referred to as “DTTs”) between Russia and 38 “unfriendly” states. The suspension of the DTTs clauses comes in force immediately after the publication of the Decree, thus the new tax regime applies to the income received from 8 August 2023.

Russia has suspended the provisions of DTTs with the following countries: Albania, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Lithuania, Luxembourg, Macedonia, Malta, Montenegro, New Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom, USA.

Which clauses have been suspended?

The Decree suspended certain DTTs clauses, including ones regulating the taxation of the following types of income:
• Income from immovable property;
• Dividends;
• Interest;
• Royalties;
• Capital gains;
• Independent personal services / income from employment;
• Income of the members of administrative and supervisory boards.

These provisions either determined in which state each type of income was taxable or limited the applicable withholding tax rate that could then be set off against the income tax in the country were the individual or the company was a tax resident.

What rules are still in force?

Only subsidiary clauses, such as: personal scope, tie-breaker rules, elimination of double taxation, exchange of information and some others, remain in force.

According to the above DTTs, the clause regarding the elimination of the double taxation is applicable only to those types of income that are expressly specified in that DTT. Consequently, once the provision governing a particular type of income (as indicated above) has been suspended, the rule of double taxation avoidance does not apply.

We will continue keeping you posted on the above.

If you have any questions in respect to the foregoing please contact our lawyers:
Tatiana Astahova and Vlada Kovaleva

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