Companies and individuals whose tax structures rely on the Treaty are advised to:
- analyze the implications of the Treaty's termination for entities that make income payments from Russian sources (dividends, interest, royalties, income from the lease or sale of property, etc.);
- consider making the maximum allowed amount of income payments from Russia before the end of 2021;
- look into the possibility of transferring Dutch companies to other jurisdictions (taking into account Russian and European anti-avoidance rules and rules on the disclosure of information on cross-border transactions2) or to the Russian special purpose regions (Kaliningrad oblast, etc);
- identify and review corporate and contractual structures that the Russian or foreign tax authorities may view as aggressive tax planning schemes;
- consider whether a “look-through” approach may be applied for payments to Dutch companies, including in cases where the beneficial owner of the income is a Russian tax resident;
- assess the implications of the potential inclusion of the Netherlands on the Russian Finance Ministry’s “blacklist”3 after the termination of the Treaty.
If your company decides to change its business structure, review its contractual relationships, or make payments from Russia before the end of 2021, we recommend taking the necessary steps as quickly as possible. That said, we also underscore the importance of complying with Russian law when considering a restructuring, as the Russian tax authorities are likely to regard such changes with increased scrutiny.
Click here to access the Russian Version.
1. Agreement between the Government of the Russian Federation and the Government of the Kingdom of the Netherlands for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on property, signed 16 December 1996 (the “Treaty”).
2. Including the EU Anti-Tax Avoidance Directive (ATAD) and the amended EU Directive on Administrative Cooperation in the Field of Taxation (DAC6).
3. “List of states and territories providing a preferential tax regime and/or not disclosing information when carrying out financial transactions (offshore zones)” established by Order of the Russian Finance Ministry No. 108n dated 13 November 2007.