Tax perspectives for Russian companies in respect of the Russian-Netherlands double tax treaty denunciation

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Since April 2020, the Russian Federation has been taking actions to increase tax rates for several types of income under double taxation treaties (DTTs) with jurisdictions that the Russian government recognizes as mainly used for holding activities. The Netherlands was named among such jurisdictions and in August 2020, Russia conditioned the Netherlands to either increase the withholding tax rates for dividend and interest income to 15% (with minor exceptions) or to denounce the DTT completely.

After several months of discussions, the Russian Ministry of Finance reported that negotiations with the Netherlands were unsuccessful.  A couple of months later in May 2021, Russia signed a law denouncing the DTT with the Netherlands. In June 2021, the Russian Ministry of Foreign Affairs completed the DTT denunciation procedures under article 31 by providing notice to the Netherlands.

Thus, the DTT with Netherlands, one of the most popular jurisdictions among multinational groups to structure their business in Russia, will terminate on January 1, 2022.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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