The Russian Ministry of Finance in April 2020 sent official letters to the Ministry of Finance of Cyprus and to the Ministry of Finance of Luxembourg requesting changes to the withholding tax provisions of the current income tax treaties between Russia and Cyprus and between Russian and Luxembourg.
In March 2020, Vladimir Putin, president of the Russian Federation, announced measures to address the economic impact of the coronavirus (COVID-19) pandemic, and these measures included negotiations with foreign jurisdictions to amend Russia’s current income tax treaties to set the minimum withholding tax rate on dividends and interest paid from Russia at 15% (from the standard treaty-provided withholding tax rates of 15% for dividends and 20% for interest).
Cyprus was the first treaty partner to receive an official letter from the Russian Ministry of Finance regarding changes to the existing income tax treaty. A similar letter was sent to Luxembourg.
Regarding the tax treaty with Luxembourg, the intent is that effective 1 January 2021, the minimum withholding tax rate under the Russia-Luxembourg income tax treaty would be increased:
Russia has three jurisdictions on its “black list”—Cyprus, Malta, and Luxembourg—and these countries are often used when structuring investments into Russia. However, the list of jurisdictions with which Russia would like to amend the withholding tax rates contained in income tax treaties is at present unknown.
Read a May 2020 report prepared by the KPMG member firm in Luxembourg
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.