The Ministry of Finance has an intention to stimulate foreign investment with changes in tax agreements


The Ministry of Finance has proposed some measures to make Russia more viewed as a country where holdings can be placed. The initiatives were included in the program document “The main directions of budget, tax and customs tariff policy for 2021 and the planning period of 2022 and 2023”.

Measures for the transformation of the holding regime are indicated in the section “Topical issues of taxation for the future. Here are the topics and areas on which the government plans to work in the next three-year period.

Having closed the possibilities for tax-free capital withdrawal abroad, for example, through Cyprus, Luxembourg or Malta, the Ministry of Finance expects the return of holdings to Russia, including to special administrative regions (SAR) in Kaliningrad and Vladivostok, where public international companies are offered a rate of 5% instead of 15% for the payment of dividends abroad.

“There is no agreement at all on the Arab Emirates, on Turkey, on Malaysia, for example, agreements were concluded a long time ago and taking into account the best practices, of course, they should be brought into line. But I would like to note right away that there will be no repetition of the mistakes that we made when, for example, there was an agreement with Cyprus, and even if we make some changes to the agreements, there will be no zero interest rate on the tax source, and the reduced rate of the tax source on dividends will be applied only in if there are really real investments in the Russian economy, and not looped structures of investments of Russian companies in the Russian economy,” Deputy Head of the department Alexey Sazanov said at the Vedomosti conference “Tax results of the Year”.

Alexey Sazanov noted that such simplifications and changes will be able to stimulate the arrival of direct investments from foreign partners in the Russian economy.

The amendment to the agreement on the avoidance of double taxation, he noted, is a bilateral process, everything depends not only on the desire of the Russian side, but also on the desire of partners to work in this direction. “It is important to take this into account in general when we discuss the possibilities of changing agreements.” “We will minimize by all means the possibility of structuring holding ownership for the Russian business through these jurisdictions,” he said.

Briefly about the situation

To replenish the budget, Russia cancels tax incentives that make it more profitable to withdraw capital. As a result, agreements with countries where conditions allow to reduce the rates on dividends from the standard 15% to 5 or 10%, as well as on interest on loans from 20 to 0%, are being revised. New agreements were signed by Cyprus and Malta.

Luxembourg agreed to similar changes. Negotiations with the Netherlands are continuing, and the Russian government has also proposed raising taxes on capital withdrawals to Switzerland and Hong Kong.

There are exceptions among the conditions proposed by Russia. For real investors, the 5% rate on dividends will remain. Public companies will still be able to apply rates of 0 and 5% with 15% of shares in free circulation and shares in Russian assets above 15%, as well as insurance companies and pension funds. The exemption from tax on interest payments on corporate bonds, government securities and Eurobonds will remain. And also the zero tax on royalties remains.


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