Increasing the tax rate on dividend income

The course towards deoffshorization of the economy taken by the Government since 2013 has proven to be quite effective. During this period, there has been a significant decline in the shadow withdrawal of capital from the country. Business representatives began to refuse to structure companies through the residency of beneficiaries in low-tax jurisdictions. Cyprus, Luxembourg, the Netherlands, and Switzerland are in particular demand among Russian business.

Russia is currently a party to more than eighty tax treaties that allow for a Russian source dividend tax rate of 5% or 10% (depending on the terms of the treaty).

Russian President Vladimir Putin, in an address to Russian citizens related to measures to support the population during the COVID-19 epidemic, announced plans for the need to amend existing bilateral agreements.

As the President noted, the changes will affect the increase in the tax rate on dividends paid by Russian legal entities to their beneficiaries from the current 5–10% to 15%. At the same time, with those countries that do not agree to such adjustments, agreements can be terminated unilaterally.

The Prime Minister of the Russian Federation has already instructed the Ministry of Finance of the Russian Federation to work out all agreements regarding dividend payments within a month. On behalf of the Chairman of the Government of the Russian Federation, tax on dividends when they are withdrawn abroad should be levied at a rate of at least 15%.

The LEGAL RIGHT company will follow the relevant changes in the regulation of international taxation and inform about new initiatives related to this area.

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