Negotiations between the Ministries of Finance of the relevant states regarding the amendment of the Double Tax Treaty (DTT) and the increase of withholding tax to 15% on dividends and interest having failed, the Russian Government approved the bill on denunciation of DTT between Russia and the Netherlands. The bill was submitted for further approval by the Russian Parliament on April 12, 2021.
Even though there is still a miraculous chance that the situation could be reversed until the denunciation procedures are completed, termination of the DTT seems more and more realistic.
In such a case, Russia-sourced income distributed to the Dutch companies would be assessed to withholding tax at the rate of 15% on dividends and 20% on interest and royalty starting from January 01, 2022. Furthermore, a double taxation burden might arise in case of further re-distributions to Russia.
These changes would dramatically affect investment projects implemented in Russia and structured via the holding companies located in the Netherlands.
At this stage, it is advisable to closely follow the situation and discuss with your professional advisors possible restructuring opportunities which may vary depending on the specifics of each particular project.
NAZALI TAX & LEGAL