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Our team recalls the changes in the tax rate on dividends and interest in relation to the Treaties for the avoidance of double taxation with Cyprus, Malta and Luxembourg

Ms. Olga Grigorieva
General Director

On March 25, 2020, President Vladimir Putin, in his address to the citizens of Russia, announced the need to adjust the double taxation treaties(hereinafter – DTT) in terms of increasing the tax rate on income in the form of dividends and interest. He noted that if the other parties do not accept the conditions of the Russian Federation, then it is necessary to withdraw from the agreements unilaterally.

According to the changes made to the DTT with Cyprus on 08.09.2020, dividends and interest on loans paid from Russia will be taxed at a uniform tax rate of 15%.

Similar changes were made to the DTT with Malta on 01.10.2020. The amendments to the Malta DTT also concern only dividend and interest income; The tax regime for other types of income has not been changed.

Also on 30.12.2020, Federal Law No. 486-FZ on the ratification of the Protocol on Amendments to the DTT between the Russian Federation and the Grand Duchy of Luxembourg was published.

The protocol providing for changes to the DTT with Luxembourg is practically identical to the amended protocol to the DTT with Cyprus.

A preferential rate of 5% on dividends will available to be received by:

  • institutional investors such as pension funds and insurance institutions;
  • government and its political subdivisions;
  • public companies, at least 15% of whose voting shares are in open circulation, while the share of direct participation of such a company in the interest-paying organization for 365 calendar days is at least 15%;
  • Central bank.

The amendments to the DTT concern only income in the form of dividends and interest; the regime of taxation of other types of income has not changed. Royalties for the use of intellectual property objects will be taxed only in the state of the recipient of the income.

Russia is currently negotiating a similar change to the DTT in terms of raising the withholding tax rate of dividends and interest to 15% with the Netherlands. Similar requests were sent to Switzerland and Hong Kong.

We will monitor further changes and inform you about them.