Russia, Luxembourg Amend Tax Treaty

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Russia and the Grand Duchy of Luxembourg have agreed an addendum to the 1993 tax convention between the two countries. The Ministry of Finance confirmed that the conventional withholding tax rate on dividends and interest will be raised to 15%, with some exceptions.

The addendum was signed on November 6 in Moscow by Luxembourg’s ambassador to Russia, Georges Faber, and the Russian Deputy Minister of Finance, Alexeï Sazanov, and is expected to enter into force from 1 January 2021, once both countries have fulfilled the legislative procedures required.

The amendment, which was requested by Russia, raises to 15% the tax rate payable in bilateral royalties and is three times the rate dating back to the 1993 convention. Certain exemptions to the new rule will pay the current rate of 5%.

The increase in taxation will apply to Russian investments in Luxembourg, and vice versa, in accordance with Vladimir Putin’s wishes – in March, the Russian president expressed the desire to update unfair taxation on foreign businesses.

The Russian Finance Ministry has been updating several DTA, closing loopholes that has seen overly generous terms for Russian nationals investing overseas, and wish to increase the tax on dividends that are withdrawn abroad, from previously agreed rates to 15%. This measure requires adjustment of agreements on avoidance of double taxation with some countries.

Russia is also negotiating an amendment to its DTA with the Netherlands.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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