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This new decree cancels withholding tax provisions, property income tax relief, dividends, interest, royalties, pensions and other tax relief and comes into immediate effect. A full English translation of decree text and specific articles are provided in this article.
The Russian President, Vladimir Putin has signed an executive order on suspending certain provisions of tax agreements with several countries that Russia has designated as unfriendly. These include provisions within Double Tax Agreements (DTA) and Tax Evasion treaties made with Albania, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Cyprus, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Iceland, Italy, Japan, Lithuania, Luxembourg, Malta, Montenegro, New Zealand, Norway, North Macedonia, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, United Kingdom and the United States.
The document immediately suspends the provisions of specific articles within the international treaties signed with Russia and is intended to ensure the adoption of measures aimed at reducing the impact on the economy of Russia of the consequences of the suspension of the provisions of these treaties.
An unofficial English translation of the decree outlining the specific articles as relates to each individual treaty can be downloaded here.
Most of the changes are far reaching and suspend all DTA benefits for businesses from any of these countries operating within Russia. This includes withholding tax provisions, property income in Russia, dividends, interest, royalties, pensions and other relief. Both individuals and businesses with performing assets or operations in Russia should pay strict attention to this decree and the relevant articles described, as it takes immediate effect and will increase taxable liabilities for these operations in many cases.
Russia’s regulations state that a decree like this one, signed by VVP, is active and in effect from the moment of its “publication”. It now goes to the Duma where they will bring it in line with current legislative bells & whistles. For all intents and purposes therefore, it is now in effect.
Of note are the suspension of articles in treaties signed with previously Russian-friendly offshore tax havens, including Cyprus, Luxembourg, Malta, and Switzerland. The result officially stops any cooperation between Russia, and especially most of the European Union, the European Free Trade Association and the United States and Canada concerning the details of any funds held or transferred between these countries and Russia. It is also likely to push Russian capital held overseas into new jurisdictions, and especially into Dubai and to some extent Hong Kong and Mauritius.
Foreign and Russian nationals seeking advice as to how this decree will impact them and mitigating actions may contact Maria Kotova at Dezan Shira & Associates for assistance. Please email russia@dezshira.com.
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During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email russia@dezshira.com or visit www.dezshira.com
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