Prime Minister Mikhail Mishustin approved the protocol on amending the agreement on the avoidance of double taxation currently in force between Russia and Luxembourg. The draft federal law on ratifying the protocol will be submitted to the State Duma shortly. After it passes, it will be reviewed by the Federation Council and signed by the President.
Russia and Luxembourg signed a protocol on amending the agreement on the avoidance of double taxation in early November 2020. It provides for increasing the tax withholding rate to 15 percent on dividends and interest.
The protocol identifies a number of exceptions, according to which a preferential tax rate of 5 percent or less will apply to capital gains in the form of dividends or interest. The exceptions will apply to institutional investment and public companies, at least 15 percent of whose shares are in free circulation and which own at least 15 percent of the capital of a company that is paying the above capital gains during the year.
The amendments to the agreement will not affect the interest paid on Eurobond loans, bond issues of Russian companies and loans issued by foreign banks.
The agreements with foreign partners are being revised as part of President Putin’s instructions. In his address to the nation in March 2020, the President focused on unfair taxation of corporate revenue in offshore jurisdictions at rates below the personal income tax rate. The President ordered adjustments to agreements with such countries so that interest and dividends that are paid abroad are taxed at the same 15 percent rate as in Russia.