Russia and Abkhazia took a significant step towards economic cooperation by signing an income tax treaty, on 7 May, 2024, marking the agreement as a first between the two regions.
The treaty, once ratified, will prevent double taxation and introduce standardised tax rates.
It establishes a 10% withholding tax rate on dividends and royalties, with interest income tax set at 0%; meaning that interest on loans from one contracting state to another won’t be taxed in the source state, benefiting the lending state’s budget.
Additionally, developers are granted an 18-month tax exemption period during construction in another country, ensuring no permanent representative office is formed, with tax obligations resting solely with the country of residence.
Abkhazia is only recognised as an independent state by a handful of nations, which includes Russia, but is primarily recognised as part of Georgia by the international community. This new tax deal between Russia and Abkhazia will make their economies work closer together despite the dispute regarding who controls Abkhazia.
