Overview of tax events for August 2020
Regulatory developments
- The Republic of Cyprus has agreed with the Russian terms to amend the double taxation agreement between Russia and Cyprus to increase to 15% the withholding tax on dividends and interest. The protocol must be ratified by the end of the year to come into effect from 1 January 2021.
- Russia and Malta have agreed on similar amendments to the double taxation agreement. Luxembourg has consented to the Russian terms to revise the taxation agreements. Formerly, the Russian Finance Ministry forwarded a letter to its counterparts from the Netherlands suggesting that the rate of the tax on dividends and interest income received from Russia be increased up to 15%.
Additionally:
The Russian President permitted the Russian Government to continue negotiations with other countries regarding the increase of taxes on dividends and interest received from Russian companies. The first in line are Switzerland and Hong Kong.
- The Russian President signed the Law “On the digital financial assets” to become the third law adopted in July that regulates fintech. When you sell bitcoin you will have to pay income tax in the same way as when you sell securities, and comply with other requirements of the law on securities market.
- The Russian Ministry of Finance:
- proposed amendments to the Tax Code lowering the thresholds for companies entering into tax monitoring;
- proposed a draft law detailing the specific taxation aspects of profits generated by standalone units of multinational companies;
- has drafted amendments to the Tax Code whereby multinational holding companies registered in Special Administrative Districts (SAD) will be exempted from tax on profit remitted by their foreign units, while the tax on dividend income from shares of (membership interest in) multinational holding companies will be cut to 5%.
- The Russian Ministry of Economic Development is planning on allowing foreign businesses from unreliable regional groups to move to Special Administrative Districts (SAD) on the islands Russky and Oktyabrsky. The amendments also describe transit redomiciliation (move) for those who cannot change the jurisdiction directly. Moreover, the amendments grant powers to the Russian Government to set parameters for annual registration fee for residents of Russian offshores.
Practice
- In its Letter No. ShYu-4-13/12599 dated 6 August 2020, the Federal Tax Service clarified the taxation of intra-group services.
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- The Federal Tax Service emphasised the special conditions for being recognised as a tax resident in 2020. The period of stay in Russia required to obtain the tax resident status has been cut in half to 90 days.
- By 30 September, manufacturers and importers, wholesale companies and retail chains must label perfume and photo products imported into Russia. Starting from 1 September, all information regarding the movement of perfume products will be sent over to the digital system “Chestny Znak” (Fair Designation).
- The World Bank has decided to suspend the publication of the Doing Business ranking of countries. This decision was due to violations connected with the data being changed in earlier reports.