Russia’s Finance Ministry and Foreign Ministry propose suspending double taxation agreements with unfriendly countries until Russia’s rights are restored, it said in a statement.
“Since 2022, unilateral economic restrictive measures have been imposed by Western countries against Russia. In particular, in February, the European Union added Russia to the list of non-cooperative tax jurisdictions, the so-called EU black list. The introduction of restrictive measures unilaterally is a violation of international law. Accordingly, Russia has grounds for the introduction of retaliatory measures. In this regard, the Russian Finance Ministry and the Russian Foreign Ministry proposed to the President of the Russian Federation to issue a decree on the suspension of agreements on avoidance of double taxation by all countries that have introduced unilateral economic restrictive measures against Russia.”
It is proposed to suspend these agreements until the violated rights of Russia are restored, the Finance Ministry says.
If the proposal of the two ministries is supported, the application of reduced withholding tax rates (tax exemptions) on income covered by double taxation agreements will be suspended from the moment the relevant decree comes into effect.
Russia has double tax treaties with numerous countries with those between Russia and the following likely to be suspended: Albania, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Macedonia, Montenegro, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovenia, Spain, South Korea, Sweden, Switzerland, Ukraine, United Kingdom, and the United States.
Russia will be suspending these DTA as it sees little point in continuing to offer tax preferences to countries that have sanctioned it and whose trade with Russia has reduced as a result. However, the move could work against certain individuals with double-nationality and in some cases, businesses that legitimately continue to trade with Russia.
Despite these likely DTA suspensions, 39 countries would continue to maintain DTA with Russia. Some movement of persons or businesses from suspended to non-suspended DTA countries may occur but is likely to be limited. Existing DTA that may be attractive and will remain in force include with Argentina, China, Hong Kong, Egypt, India, Indonesia, Iran, Israel, Malaysia, Mexico, Mongolia, Philippines, Qatar, Saudi Arabia, Serbia, South Africa, Sri Lanka, Thailand, Turkiye, Venezuela, Vietnam, and the CIS and EAEU nations. These will remain particularly beneficial for individuals and companies based in these countries who provide trade or services with Russia.