Russia: Double Tax Treaties

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The new profits tax law which came into force in 2002 significantly changed the withholding tax regime applying to Russian source income paid to foreign companies without a permanent establishment in Russia. The new withholding tax regime is now much closer to OECD principles and the previously extremely bureaucratic procedure for obtaining advance treaty clearances has been much simplified.

Tax treaties to which the former USSR was party are honored by Russia, unless the other party to the treaty has renounced it or it has been replaced by a new treaty. In the last few years Russia has entered into many new treaties based on the OECD Model Convention.

A foreign company claiming an exemption from Russian withholding tax based on a treaty must obtain and provide to the Russian payor a confirmation from the foreign tax authority that the company is tax resident in the relevant treaty country. The tax authorities have clarified the information, which is necessary to confirm the eligibility of the foreign company to the treaty exemption in such a certificate.

Table Of Treaty Rates

These rates apply to withholding taxes on Russian source income. Numbers in parentheses refer to notes below the table.

Notes:

(1) 5% for 10% shareholders, otherwise 15%

(2) 10% for 10% shareholders, otherwise 15%

(3) 5% if initial investment greater than US$100,000, otherwise 10%

(4) 5% for 30% shareholders, otherwise 12%

(5) 5% if investment not less than FFr 500,000 and if the recipient pays tax; 10% if either is untrue; otherwise 15%

(6) 5% for 10% shareholders, otherwise 15%

(7) 5% for10% shareholders, otherwise 10%

(8) 0% for royalties in respect of literary, artistic or scientific works including films and tapes; 10% for royalties in respect of any patent, trade mark, design or model, plan, secret formula or process, or industrial,
commercial or scientific equipment, or information concerning industrial, commercial or scientific experience.

(9) 5% for 30% shareholders, otherwise 10%

(10) 10% for 30% shareholders, otherwise 15%

(11) 5% for 25% shareholders, otherwise 15%

(12) 0% for commercial loans in connection with a delay of payment for goods, equipment and services; otherwise 10%

(13) 10% for 25% shareholders, otherwise 15%

(14) 5% for participation of at least ECU100,000 and if the dividends are exempt from tax in; 10% if either condition is met; otherwise 15%

(15) 0% if the actual recipient of interest is the government of the other contracting state, or for long-term bank loans (exceeding 7 years); otherwise 5%

(16) 5% for 100% participation or 30% participation in a joint venture; otherwise 15%

(17) 5% for 20% shareholders, otherwise 15%

(18) 5% for bank loans, otherwise 10%

(19) 5% for participation of at least US$50,000; otherwise 15%

(20) 5% for 10% shareholders, otherwise 10%

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