The Ministry of Finance offers neutral countries a tax agreement using the 10-10-10 formula
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The Ministry of Finance of the Russian Federation has revealed what proposal it is making to neutral countries to update the existing one or sign a new agreement on the avoidance of double taxation (DTT). The standard formula assumes rates on payments of dividends, interest and royalties abroad at the level of 10%, said State Secretary, Deputy Minister of Finance Alexey Sazanov “Vedomosti”.
“There is a universal compromise version of the agreement, which we are ready to offer with rates of 10-10-10. This is linked to the rates that we offer in special administrative regions for those who moved there from foreign jurisdictions,” said Mr. Sazanov.
The Ministry of Finance, as the deputy minister said, seeks to prevent a repetition of the situation when businesses use foreign jurisdictions to obtain lower tax rates by creating holding companies there. The terms of the agreement should help increase the influx of foreign investment and not lead to a decrease in the national tax base.
Negotiations on the DTT, as Mr. Sazanov explained, begin with requests from business associations for additional adjustments. Proposals must include “certain reasoning.” The Ministry of Finance allows some benefits, but is not ready to make exceptions for holding companies.
The Ministry of Finance has been working on revising tax agreements with countries that have not joined the sanctions since the summer of 2022. Negotiations were completed only with Oman. Last fall, the Ministry of Finance wanted to reconsider agreements with Malaysia, Turkey and the UAE. According to Mr. Sazanov, active negotiations are ongoing only with the UAE, but they are not close to completion. Negotiations with Turkey have been suspended since Ankara has not shown interest in re-signing the DTT. Agreements with countries that have imposed sanctions against the Russian Federation have been suspended.
Read more about double taxation agreements with unfriendly countries in the Kommersant article. “To avoid agreements”.
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