The Russian Ministry of Finance has issued Guidance Letter No. 03-08-05/11484 on 12 February 2024, outlining the taxation of interest payments to French residents following the suspension of the Russia-France tax treaty under Decree No. 585 on 8 August 2023.
Effective from that date, French residents receiving income from Russian sources are subject to a 20% withholding tax on interest payments.
However, the guidance provides relief under Article 310 of the Russian Tax Code until 31 December 2025 for certain types of interest income, such as payments to foreign export credit agencies and banks under pre-Decree agreements.
According to the amendment, withholding tax on such interest income will not be imposed by the tax agent under certain conditions.
Firstly, the interest income must not have been taxable in Russia under the relevant tax treaty before the decree’s enactment.
Secondly, the Russian resident entity paying the income and the foreign recipient must not be related parties as defined in Article 105.1 of the Tax Code.
Lastly, the foreign entity must provide the required confirmations to the Russian tax agent, as stipulated in paragraph 1 of article 312 of the Tax Code.
If the conditions stated above are not fulfilled, a withholding tax of 20% must be computed and deducted from interest income received by a French company from a Russian company for payments made on or after 8 August 2023.
