The Russian Ministry of Foreign Affairs has declared to suspend application of double tax agreements (DTAs) with unfriendly 38 countries that have introduced unilateral economic restrictions against Russia.

The potential repercussions entail Russia’s implementation of domestic withholding rates. These rates include 15% for dividends, 20% for royalties, interest, and select income categories and 10% on freight fees paid to corporate non-residents from the unfriendly countries. For non-resident individuals, income is generally taxed at 30%, while dividends are subject to a 15% tax rate. Most likely these withholding taxes will not be credited by treaty partner countries.

When the announcement was made regarding the “suspension” of DTAs applications, no mention was made of any intention to terminate these double tax treaties. This absence of an intention to terminate creates an element of uncertainty, as the concept of “suspension” is not typically addressed or defined in the DTAs themselves. Consequently, this move may be viewed as non-compliant with the treaty obligations. As a result, the specific response and potential consequences from the affected countries remain uncertain.

The list of unfriendly countries includes Australia, Austria, Albania, Belgium, Bulgaria, United Kingdom, Hungary, Germany, Greece, Denmark, Ireland, Italy, Iceland, Spain, Canada, Cyprus, South Korea, Latvia, Lithuania, Luxembourg, Malta, North Macedonia, New Zealand, Norway, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, United States, Sweden, Switzerland, Finland, France, Japan, Croatia, Czech Republic, and Montenegro.