International Tax Partner
Crowe Expertiza
+3 164 082 6427
roustam.vakhitov@crowerus.ru
On 4 December 2020 the Russian Ministry of Finance announced initiation of the termination of DTT with the Netherlands due to absence of process in its renegotiation. There is six months’ termination notice, hence DTT may cease to apply as of 2022.
Following renegotiation of DTTs with Cyprus, Luxembourg, and Malta, where WHT on dividend and interest in general increased to 15% while existing preferential 5%/0% WHT rates remain available only to public companies and certain types of loan financing, e.g. bank loans, eurobonds etc.
It appears that the Netherlands did not accept these conditions. As the Netherlands does not apply WHT on dividends, interest and royalty payment to Russia, the net effect of the amendments would be only the increase of tax on genuine Dutch businesses into Russian economy without corresponding benefits for the Dutch investors or state revenue. It is not clear if this notification on the intention to terminate DTT is definite. In 2 out of 3 recent renegotiations of DTTs, Russia announced termination of relevant DTTs, after which renegotiations were concluded successfully.
All groups and companies investing into Russia via the Netherlands should review their current holding and finance structures to assess whether the structure needs to be revised and assess the impact of the possible termination of DTT between Russia and the Netherlands as of 2022.
