Russia Denounces Tax Agreement With Netherlands – Tax


Russia Denounces Tax Agreement With Netherlands

30 July 2021

Gorodissky & Partners

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Federal Law 139-FZ got here into drive on 26 May 2021, thereby
denouncing the settlement between Russia and the Netherlands on
double taxation avoidance and tax evasion provisions regarding
revenue and property tax.

Russia’s Ministry of Finance made the denouncement after
many makes an attempt to amend the settlement since initiating it with the
Netherlands on the finish of 2019. During this era, Russia took the
similar motion in its negotiations with Malta, Cyprus and Luxembourg,
whose corporations have been historically used to construction possession
schemes regarding Russian belongings. Russia proposed to considerably
amend the phrases of the double taxation avoidance agreements,
demanding that the taxation price on passive revenue (comparable to
curiosity, dividends and royalties) for these international locations’
residents rise to fifteen% from the prevailing very low or zero price.

However, for Malta, Cyprus and Luxembourg, the notification of
denouncement after months of inauspicious negotiations led the three
international locations to reply with a protocol to amend the tax agreements on
Russia’s phrases. However, the Netherlands selected to not make
concessions for Russia’s major necessities, which concluded the
negotiations. The termination of the settlement is about for 1 January
2022. It is the primary denouncement of a tax settlement in Russian
historical past.

The termination of the settlement with the Netherlands could have
a unfavourable influence for a major variety of corporations working
within the Russian market, since many worldwide holding corporations
have used this jurisdiction to construction possession of Russian
belongings. However, the redomiciliation of overseas corporations to
inner offshore zones in Russia’s Special Administrative
Regions (SARs) could also be an answer (for additional particulars please see
“Range of advantages for corporations domiciled in SARs
considerably expanded”).

Despite the advantages that the SARs supply, overseas traders
working with Russia by Dutch corporations will encounter
difficulties when trying to set up the previous association with
different jurisdictions, because the Ministry of Finance intends to make
comparable revisions to tax agreements with jurisdictions comparable to Hong
Kong, Singapore and Switzerland with the intention to improve taxation of
passive revenue.

The content material of this text is meant to supply a common
information to the subject material. Specialist recommendation needs to be sought
about your particular circumstances.

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