Contributed by Vladislav Donchenko, tax partner in “Lex Alliance” law firm, Moscow.

The Russian Federation begins the procedure for denunciation of the agreement on the avoidance of double taxation with the Netherlands.

The Russian government approved the proposal to denounce the agreement on the avoidance of double taxation with the Netherlands, the corresponding decree was signed by Prime Minister Mikhail Mishustin. The was submitted to the State Duma on April 12, 2021

On April 20, the State Duma Committee on International Affairs at a meeting on Tuesday recommended that the House adopt a bill to denounce the agreement between the governments of the Russian Federation and the Netherlands on the avoidance of double taxation and prevention of tax evasion. The committee's conclusion is posted in the Duma electronic database.

According to the document, the committee recommends that the State Duma adopt a law on the denunciation of the DTT, and also recommended that the State Duma Council include this issue on the agenda of the May 11 meeting.

The breakdown of DTTs with the Netherlands will negatively affect international structures, which include links of Russian and Dutch companies, as well as individuals, since Russian tax legislation does not provide for the possibility of offsetting foreign tax in the absence of DTTs.

As a result of the denunciation, dividends of Russian companies will be taxed at source at a rate of 15%, interest and royalties at a rate of 20%.

In connection with these changes, it is necessary to think about the restructuring of groups of companies in order to increase tax efficiency. Our team is ready to find the best options for your business.

How we can help you

Analysis of current international group of companies to identify possible risks related to the new WHT rates and MLI application.

Developing of restructuring options to increase tax efficiency of the business structure taking into consideration future risk of WHT rates changes (Switzerland and Singapore) and application of MLI convention to other double tax treaties.

We would be happy to discuss this information with you to assess the impact of the new changes on your group structures.

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