At the beginning of April 2020, the Russian Ministry of Finance – upon instruction from the president of the Russian Federation – sent an official letter to the Ministry of Finance of Cyprus requesting changes to the provisions of the current double tax treaty (DTT).
Information provided recently by the press office of the Russian Ministry of Finance shows that the same official letter was also sent to the Luxembourg Ministry of Finance.
In March 2020, Vladimir Putin, president of the Russian Federation, addressed the nation to announce the main measures being taken to tackle coronavirus.
As part of the address, Putin instructed the government to quickly initiate negotiations with foreign jurisdictions to amend Russia’s current DTTs to set the minimum withholding tax rate on dividends and interest payed from Russia at 15%. It is worth recalling that the standard Russian withholding tax rates on dividends and interest are 15% and 20%, respectively.
Cyprus was the first to receive an official letter from the Russian Ministry of Finance regarding these amendments to the current DTT. The Russian Ministry of Finance has also sent the same letter to Luxembourg. Thus:
The intention of the Russian Government is that the 15% withholding tax rate on dividends and interest payments would be applicable as of 1 January 2021.
To date, Russia has three jurisdictions on its “black list” (Cyprus, Malta, and Luxembourg) that are often used when structuring investment going to Russia. However, the list of jurisdictions with which Russia would like to amend DTTs is still unknown.
As such, we recommend the following:
For queries please contact:
Manager, International tax, Russian desk
Phone: +352 22 51 51 5512
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