The Russian Ministry of Finance (MoF) issued Guidance Letter No. 03-08-09/96760 on 2 November 2024, clarifying the tax treatment of payments related to the operation of shipping vessels in international transport, in accordance with the 1997 tax treaty with Turkey.
The letter highlights that, under Russian tax law, income from international transportation is subject to income tax withheld at source in Russia.
However, when a tax treaty exists, as in this case with Turkey, the treaty’s provisions take precedence.
Specifically, Article 8 of the treaty on Profits from Shipping, Air, and Land Transport states that profits from international transport may be taxed in the country of the receiving enterprise, with a 50% tax reduction.
As a result, payments for the operation of shipping vessels to Turkish companies will be taxed at a reduced rate of 5%, based on Russia’s standard 10% withholding tax rate and the treaty’s provisions.
