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both countries, but at a reduced rate. If the agreement is canceled, double taxation will not be avoided.
As a rule, agreements on the avoidance of double taxation regulate personal income tax and income taxes, RBC notes. In particular, the DTT provides for a reduced tax on dividends (5-10% versus Russian 15%) and a zero rate on interest payments and royalties (instead of 20%), Kommersant writes. How much taxes, for example, Russian investors will pay due to double taxation, can be found here.
Experts note that it is not yet possible to understand from the wording of the Ministry of Finance and the Foreign Ministry with which countries the DTT will be suspended. At a minimum, these will be the EU countries in which the blacklist against Russia has already been launched (this is a smaller part of the EU). As a maximum - all "unfriendly" countries (that is, about 40 states).
Russian companies that still have a presence in the EU or are currently restructuring their “foreign circuit” could suffer, experts add. For them, the tax burden can increase by 15-40%.
Also, additional difficulties may arise for Russian owners of controlled foreign companies from "unfriendly" countries. For example, TCS Group is registered in Cyprus, which includes Tinkoff Bank, as well as Cian, Ozon, HeadHunter and others.
The changes will also affect international companies operating in Russia, but registered in "unfriendly" countries, RBC notes. However, now there are few such companies, so Russian business will suffer more than foreign ones, experts admit.
Even private investors with blocked assets can suffer if the Federal Tax Service manages to prove that they were credited with coupons and dividends on foreign securities, Frank Media notes. At the same time, the lack of access to these securities and income is not a basis for non-calculation of tax.
The Russian Ministry of Finance wants to collect a one-time tax (a so-called windfall tax) from all companies. However, Deputy Finance Minister Alexey Sazonov, says that oil and coal companies, as well as small and mid-sized businesses and companies with net profits under 1bn rubles (around 13mn $), will be exempt.
The tax will be collected on 2021–2022 profits that exceed 2018–2019 profits.
Interfax noted that, although exemptions for oil and coal companies and small-to-mid-sized businesses were announced up front, it is believed that the tax will not affect banks. When journalists asked for clarification on that point, Sazonov said, “at this point I haven’t heard about such exceptions.” The Bell reported that in December, the Russian government suggested that businesses make a collective one-time payment of 200–250bn rubles (around 2.7–3.3bn $). In response, the business sector proposed raising Russia’s 20%
111 RUSSIA Country Report Russia April 2023 www.intellinews.com