On Monday, the Russian government approved and submitted to the State Duma a draft law on denunciation of the double taxation treaty with the Netherlands. The Russian authorities took this step after negotiations to modify this agreement failed.
Russia will not give up tearing up the tax agreement by the Netherlands, even if this step will cause serious problems for large companies, so Russian holdings registered in foreign jurisdictions may have to think about changing their corporate structure, Yulia Pavlova, chief tax consultant of the law firm Tax Compliance, told RIA Novosti.
"It is worth taking into account that we are talking about the outflow of quite large amounts of funds in the form of dividends - the government reports speak of this," the expert said. According to the explanatory note to the bill, Russian companies paid more than 1.2 trillion rubles in dividends and interest through the Netherlands in 2017-2019, from which 32.5 billion rubles in taxes were withheld.
"Breaking the tax agreement with the Netherlands fits well with the general policy of the Russian authorities to review tax interactions with foreign countries."
The changes have so far affected four countries: the tax agreements, Malta and Luxembourg have already been revised. Denunciation of the agreement with the Netherlands, according to the expert, will have negative consequences for business, but will benefit the Russian treasury. "Changing the rate for business means higher taxes, for the budget - an increase in revenues."
"If we talk about large holdings like Yandex, it is quite likely that changes in their corporate structure to reduce the tax burden," the expert believes. She acknowledged that companies may consider this step as reducing the attractiveness of Russia as a tax jurisdiction. "At the same time, in the end, the order and nuances of taxation will depend on the contracting parties."
Read the full article at RIA News.