Convention between the Government of the Russian Federation and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Tax Evasion and Violations
The Government of the Russian Federation and the Government of the French Republic,
Desiring to conclude a Convention for the Avoidance of Double Taxation and the Prevention of Tax Evasion and Violation of Tax Laws in Respect of Taxes on Income and Property,
agreed on the following:
Article 1 Persons to whom the Convention applies
Article 1
Persons to whom the Convention applies
This Convention shall apply to persons who are residents of one or both of the Contracting States.
Article 2 Taxes to which the Convention applies
Article 2
Taxes to which the Convention applies
1. This Convention shall apply to taxes on income and on property levied at all levels in a Contracting State, regardless of the manner in which they are levied.
2. Taxes on income and property are all taxes levied on the total amount of income, the total value of property or on individual elements of income or property, including taxes on income from the alienation of movable or immovable property, taxes on the total amount of wages paid by enterprises, and as well as taxes on property gains.
3. The applicable taxes to which this Convention applies are, in particular:
a) in the case of France:
(i) income tax;
(ii) company tax;
(iii) a payroll tax governed by the provisions of the Convention applicable, as the case may be, to business profits or income from independent personal services;
(iv) solidarity tax on wealth;
b) in relation to Russia, taxes levied in accordance with the following laws of the Russian Federation:
(i) "On the tax on profits of enterprises and organizations" (including the tax on excess of the normalized amount of wages);
(ii) "On Personal Income Tax";
(iii) "On corporate property tax";
(iv) "On Personal Property Tax",
(hereinafter referred to as "Russian taxes").
4. This Convention shall also apply to any similar or substantially similar taxes imposed after the date of signature of the Convention in addition to or in lieu of existing taxes. The competent authorities of the Contracting States shall notify each other of significant changes in their respective taxation laws.
Article 3. General definitions
Article 3
General definitions
1. For the purposes of this Convention, unless the context otherwise requires:
a) the term "Contracting State" means, as the context requires, Russia or France;
b) the term "France" means the European and overseas departments of the French Republic, including the territorial waters, and beyond them, the areas where, in accordance with international law, the French Republic has sovereign rights in relation to the exploration and exploitation of the natural resources of the seabed, its subsoil and waters , covering it;
c) the term "Russia" means the territory of the Russian Federation and includes its exclusive economic zone and continental shelf, as defined in accordance with the 1982 United Nations Convention on the Law of the Sea;
d) the term "public institution of a Contracting State" means, in relation to Russia, the bodies of state power established in Russia in accordance with the terms of the Constitution of Russia, and in relation to France, the State itself, its territorial bodies, as well as their legal entities public law;
f) the term "person" includes natural persons, companies and any other body of persons;
f) the term "company" means any legal person or any entity which is treated as a legal person for tax purposes;
g) the term "enterprise of a State" means any form of business carried on by a resident of that State;
h) the term "international traffic" means any transport by a ship or aircraft operated by a resident of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;
i) the term "competent authority" means:
(i) in the case of France, the Minister responsible for the budget or his authorized representative;
(ii) in the case of Russia, the Ministry of Finance of the Russian Federation or its authorized representative, and, in the application of the provisions of Article 26, the State Tax Service of the Russian Federation or its authorized representative.
2. When the Convention is applied at any time by a Contracting State, any term or expression not defined therein shall have the meaning given to it by the law of that State, unless the context otherwise requires. The meaning given to a term or expression by the taxation laws of that State in relation to the taxes to which the Convention applies shall prevail over the meaning given to that term or expression by other branches of the laws of that State.
Article 4. Resident
Article 4
Resident
1. For the purposes of this Convention, the expression "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of incorporation, place of management or any other criterion of a similar nature. However, this expression does not include persons liable to tax in that State only in respect of income from sources in that State or in respect of property situated therein.
2. Where, by virtue of the provisions of paragraph 1, an individual is a resident of both Contracting States, his position shall be determined as follows:
a) he shall be deemed to be a resident of the State in which he has his permanent home; if he has a permanent home in both States, he shall be deemed to be a resident of the State in which he has the closest personal and economic ties (centre of vital interests);
b) if the State in which that person has his center of vital interests cannot be determined, or if he has no permanent home in either State, he shall be deemed to be a resident of the State in which he has his habitual residence;
c) if he has his habitual residence in both States, or if he has his habitual residence in neither of them, he shall be deemed to be a resident of the State of which he is a national;
d) if both States consider that person to be their national or if he is not a national of either of them, then the competent authorities of the Contracting States shall settle the matter by mutual agreement.
3. If, by virtue of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, then he shall be deemed to be a resident of the State in which his place of effective management is situated.
4. The expression "resident of a Contracting State" includes companies or groups of persons the effective management of which is in that State and whose shareholders, associate members or other members personally are liable to tax on their share of the profits in accordance with the internal laws of that State.
Article 5. Permanent establishment
Article 5
permanent mission
1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which an enterprise of a Contracting State wholly or partly carries on business in the other Contracting State.
2. The term "permanent establishment" includes in particular:
a) place of management;
b) branch;
c) an office;
d) factory;
e) workshop and
f) a mine, an oil or gas well, a quarry or any other place where natural resources are extracted.
3. A construction site or an installation site shall form a permanent establishment only if the duration of such works exceeds 12 months.
4. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall not be deemed to include:
a) the use of facilities solely for the purpose of storing, displaying or supplying goods belonging to the enterprise;
5. Notwithstanding the provisions of paragraphs and , if a person, other than an agent of an independent status referred to in paragraph 6, is acting on behalf of the enterprise and has and habitually exercises in a Contracting State the power to conclude contracts on behalf of the enterprise, it shall be deemed that that enterprise has a permanent establishment in that State in respect of any business which that person carries on for the enterprise, except to the extent that such person's activities are limited to the activities referred to in paragraph 4 which, even if carried on through a fixed place of business, would not permit treat this fixed place of business as a permanent establishment.
6. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
7. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall itself does not by itself make one of these companies a permanent establishment of the other.
Article 6. Income from real estate
Article 6
Income from real estate
1. Income derived from immovable property (including income from agriculture and forestry) situated in a Contracting State shall be taxed in that State.
2. The term "immovable property" has the meaning given to it by the laws of the Contracting State in which the property is situated. This term shall in any case include property ancillary to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of private law in respect of landed property apply, rights known as usufruct of immovable property, and rights to variable or fixed payments as compensation for the development or the right to develop mineral reserves, springs and other natural resources; sea, river and aircraft are not considered as immovable property.
3. The provisions of paragraph 1 apply to income derived from direct use, leasing or any other form of use of immovable property.
4. The provisions of paragraphs 1 and apply also to income from real estate of an enterprise and to income from real estate used for the performance of independent personal services.
5. Where shares, shares or other rights in a company or body corporate entitle the use of immovable property situated in a Contracting State and owned by that company or body corporate, income derived from the direct use, leasing or use in any other form of such rights of use may be taxed in that State notwithstanding the provisions of Articles 7 and .
Article 7. Profit from entrepreneurial activity
Article 7
Business profit
1. The profits of an enterprise of a Contracting State shall be taxable only in that State, unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If an enterprise carries on business in this way, the profits of the enterprise may be taxed in the other State, but only so much as is attributable to that permanent establishment.
2. Subject to the provisions of paragraph 3, if an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, then in each Contracting State that permanent establishment shall include the profits which it would have received had it been a separate and a separate enterprise engaged in the same or similar activities under the same or similar conditions, and operated entirely independently of the enterprise of which it is a permanent establishment.
3. In determining the profits of a permanent establishment, deductions must be made for expenses incurred for the purposes of that permanent establishment, including management and general administrative expenses, whether such expenses are incurred in the State in which the permanent establishment is situated or outside it.
4. No profit is attributable to a permanent establishment based solely on its purchase of goods for the enterprise.
5. For the purposes of the preceding paragraphs, the profit attributable to a permanent establishment is determined annually by the same method, unless there is a good and sufficient reason for changing it.
6. Where profits include types of income referred to separately in other Articles of the Convention, the provisions of those Articles shall not be affected by the provisions of this Article.
Article 8. Profit from international transport
Article 8
Profit from international transportation
1. Profits which an enterprise of a Contracting State derives from the operation of ships or aircraft in international traffic shall be taxable only in that State.
2. The profit referred to in paragraph 1 includes the profit that the undertaking derives from other activities and in particular from the use, maintenance or rental of containers for the carriage of goods in international transport, provided that this activity is ancillary operation referred to in the same paragraph.
3. The provisions of paragraphs 1 and also apply to profits from participation in a pool, joint venture or international motor vehicle organization.
Article 9 Profit adjustment
Article 9
Profit Adjustment
a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or
b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of one Contracting State and an enterprise of the other Contracting State, and in each case the two enterprises are bound in their commercial or financial relations by mutually agreed or prescribed terms and conditions other than those that would take place between two independent enterprises, then any profit that, without these conditions, could be credited to one of them, but due to the presence of these conditions was not credited to him, may be included in the profit of this enterprise and, accordingly, taxed tax.
2. Where a Contracting State includes in the profits of an enterprise of that State (and taxes accordingly) profits in respect of which an enterprise of the other Contracting State has been taxed in that other State, and if the profit so included is profit which would have been credited to an enterprise of the first-mentioned State, if the relations between the two enterprises were the same as between independent enterprises, then that other State shall make an appropriate adjustment in its taxation on those profits, if that other State considers such an adjustment justified. In determining such adjustment, due regard shall be had to the other provisions of this Convention, and the competent authorities of the Contracting States shall, if necessary, consult each other.
Article 10. Dividends
Article 10
Dividends
1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner is a resident of the other Contracting State, the tax so charged may not exceed:
a) 5 percent of the gross amount of dividends:
(i) if that beneficial owner is a company that has made an investment in the company paying the dividend, regardless of the form or type of that investment, with a total value of at least 500,000 French francs or its equivalent in another currency, each investment being valued at the date of its implementation; And
(ii) where that beneficial owner is a company which is liable to tax on profits under the common law regime provided for by the taxation laws of the Contracting State of which it is a resident and which is exempt from such tax in respect of those dividends;
b) 10 percent of the gross amount of the dividend if only conditions (i) of subparagraph a) or only conditions (ii) of subparagraph a) are met;
c) 15 per cent of the gross amount of dividends in all other cases.
The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which dividends are paid.
3. The term "dividends" as used in this Article means income from shares or other shares, other than debt claims, and income which is subject to the taxation of any participation income under the taxation laws of the State of which the company paying the dividend is a resident. dividends. This term does not include income referred to in Article 16.
4. The provisions of paragraphs 1 and 1 shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on, in the other Contracting State of which the company paying the dividends is a resident, an industrial or commercial activity, through a permanent establishment situated therein, or exercises in that other State independent personal services from a fixed base situated therein, and the participation in respect of which the dividend is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 shall apply.
5. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not levy any tax on dividends paid by that company, unless such dividends are paid to a resident of that other State, or if the participation in respect of which the dividends are paid is effectively connected with a permanent establishment or fixed base situated in that other State and no withholding tax is charged on the retained earnings of the company, even if the dividends paid or retained earnings consist wholly or partly of profits or income arising in that other State.
Article 11. Interest
Article 11
Interest
1. Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner.
2. The term "interest" as used in this article means income from debt-claims of any kind, whether or not secured by mortgage and whether or not a right to participate in the debtor's profits is held, and in particular income from government securities and bonds of loans, including premiums and winnings on these securities. For the purposes of this article, penalties for late payments shall not be treated as interest. The term "interest" does not include elements of income that are treated as dividends under the provisions of Article 10.
3. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on in the other Contracting State in which the interest arises, an industrial or commercial activity through a permanent establishment situated therein, or provides independent personal services from a fixed base situated therein, and the debt claim on which interest is paid is actually attributable to such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 shall apply, as the case may be.
4. Interest shall be deemed to arise in a Contracting State if the payer is a resident of that State. However, if the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in respect of which an obligation to pay the interest has arisen and which incurs the cost of the interest, such income shall be deemed to be arises in the State in which the permanent establishment or fixed base is situated.
5. If, due to a special relationship between the payer and the actual recipient of interest, or between both of them and any third parties, the amount of interest relating to the debt claim on the basis of which it is paid exceeds the amount that would be agreed between the payer and the actual recipient of interest , in the absence of such a relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess of the payment shall remain taxable in accordance with the laws of each Contracting State and subject to the other provisions of this Convention.
Article 12. Income from copyrights and licenses
1. Income from copyrights and licenses arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if such resident is the beneficial owner.
2. The term "royalties and licenses" as used in this Article means royalties of any kind paid for the use or for the right to use the copyright in a work of literature, art or science, including motion pictures, any recording of sound and images, a computer program , any patent, trade mark, design or model, plan, secret formula or process, or for information relating to industrial, commercial or scientific experience.
3. The provisions of paragraph 1 shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on in the other Contracting State in which the royalties arise, an industrial or commercial activity through a permanent establishment situated therein, or provides independent services from a fixed base located there, and the right or property in respect of which royalties and licenses are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14 shall apply, as the case may be.
4. Copyright and license proceeds shall be deemed to arise in a Contracting State if the payer is a resident of that State. Where, however, the person paying the royalties from copyrights and licenses, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the obligation to pay royalties from copyrights and licenses arises, and the costs of paying such royalties or licenses shall be borne by the permanent establishment or fixed base, then such royalties and licenses shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.
5. If, by reason of a special relationship between the payer and the actual recipient of the proceeds, or between both of them and any third parties, the amount of proceeds from copyrights and licenses, taking into account the use, right of use or information for which they are paid, exceeds the amount that would be agreed between the payer and the actual payee in the absence of such a relationship, the provisions of this Article shall apply only to the last mentioned amount. In such case, the excess of the payment shall remain taxable in accordance with the laws of each Contracting State and subject to the other provisions of this Convention.
Article 13. Income from alienation of property
Article 13
Income from alienation of property
1. Income derived from the alienation of immovable property referred to in Article 6 and situated in a Contracting State may be taxed in that State.
2. Income derived from the alienation of shares, shares or other interests in a company or legal person, the assets of which, directly or through the intermediary of one or more companies or legal persons, consist principally of immovable property situated in a Contracting State, or rights in such property may be taxed in that State.
3. Gains from the alienation of movable property forming part of the assets of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or of movable property relating to a fixed base which is at the disposal of a resident of a Contracting State in the other Contracting State for the purposes of exercising independent personal services, including such income from the disposal of such a permanent establishment (whether alone or together with an enterprise) or such fixed base, shall be taxable in that other State.
4. Income derived by a resident of a Contracting State from the alienation of ships or aircraft operated by that resident in international traffic, or movable property connected with the operation of such ships or aircraft, including containers referred to in paragraph 2 of Article 8, shall be taxable only in this State.
5. Gains from the alienation of any property other than that referred to in paragraphs 1, , and , shall be taxable only in the Contracting State of which the alienator is a resident.
Article 14. Income from independent personal services
Article 14
Income from independent personal services
1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State, unless that resident has a fixed base regularly used by him in the other Contracting State for the purpose of carrying on his business. If he has such a fixed base, the income shall be taxed in the other Contracting State, but only so much as is attributable to that fixed base.
2. The term "professional services" includes, in particular, the independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.
Article 15. Income from employment
Article 15
Income from employment
1. Subject to the provisions of Articles 16, , and wages, salaries and other similar remuneration derived by a resident of a Contracting State in respect of employment shall be taxable only in that State, unless the employment is carried on in the other Contracting State. If the employment is so carried on, the remuneration received in connection therewith may be taxed in that other State.
2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any continuous period of twelve months falling in one or two adjacent taxable financial years, and
b) the remuneration is paid by or on behalf of an employer who is not a resident of the other State, and
c) the cost of remuneration is not borne by a permanent establishment or fixed base which the employer has in the other State.
3. Notwithstanding the foregoing provisions of this Article, remuneration derived in respect of employment performed on board a ship or aircraft operated in international traffic may be taxed in the Contracting State of which the person operating the ship or aircraft is a resident.
Article 16. Income of members of administrative and supervisory boards
Article 16
The income of members of the administrative and
supervisory boards
Meeting fees and other similar remuneration derived by a resident of a Contracting State in his capacity as a member of the administrative or supervisory board of a company which is a resident of the other Contracting State may be taxed in that other State.
Article 17. Income of artists and athletes
Article 17
Income of artists and athletes
1. Notwithstanding the provisions of Articles 14, and income deriving by a resident of a Contracting State from his personal activities carried on in the other Contracting State as an artist such as a theater, film, radio or television artist or musician, or as an athlete, may be taxed taxes in that other State.
2. Where income from personal activities carried on by an artist or athlete in that capacity is credited not to the artist or athlete himself but to another person, whether he is a resident of one of the Contracting States or not, such income, whether or not the provisions of Articles 7, and may be taxed in that Contracting State in which the activities of the artist or athlete are carried on.
3. However, if more than 50 per cent of the income from activities carried on by residents of a Contracting State as an entertainer or sportsman in the other Contracting State derives from the public funds of the first State, such income may be taxed only in the first State.
Article 18. Pensions
Article 18
Pensions
1. Subject to the provisions of paragraph 2 and above, pensions and other similar remunerations paid to a resident of a Contracting State in connection with past employment may be taxed only in that State.
2. Pensions paid under the social security laws of a Contracting State may be taxed in that State.
3. Pensions paid by public institutions of a Contracting State, directly or from funds created by them, to an individual in respect of services rendered other than those rendered in the course of an industrial or commercial activity to one of those institutions may be taxed only in that State. However, these pensions may be taxed only in the other Contracting State if the individual is a resident of that State and is a citizen of that State.
Article 19. Remuneration for public service
Article 19
Public Service Reward
1. Remuneration, other than pensions, paid by the public institutions of a Contracting State to an individual in respect of service rendered to those institutions shall be taxable only in that State. However, these remunerations shall be taxable only in the other Contracting State if the service was performed in that State and if the individual is a resident of that State and is a citizen of that State.
2. The provisions of Articles 15 and shall apply to remuneration payable in respect of service in connection with an activity of an industrial or commercial nature performed by a public agency of a Contracting State.
Article 20. Amounts received by students and trainees
Article 20
Amounts received by students and interns
Amounts which a student or trainee who is, or immediately before arrival in a Contracting State, was a resident of the other Contracting State and is present in the former State solely for the purpose of education or practice, receives for the purposes of his maintenance, education or practice, shall not be taxable in that State, provided that the sources of those sums are outside that State.
Article 21. Other income
Article 21
Other income
1. Elements of income of a resident of a Contracting State, wherever they arise, not covered by the preceding Articles of this Convention, if that resident is the beneficial owner of the income, shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income other than income from immovable property as defined in paragraph 2 of Article 6 if the recipient of such income, being a resident of a Contracting State, carries on an industrial or commercial activity in the other Contracting State through a permanent establishment situated therein. or performs in that other State independent personal services from a fixed base situated therein and the right and property in respect of which the income is paid are effectively connected with them. In such a case, the provisions of Article 7 or Article 14 shall apply, as the case may be.
Article 22. Property
Article 22
Property
1. Property, represented by immovable property referred to in Article 6, which is owned by a resident of a Contracting State and which is situated in the other Contracting State, shall be taxed in that other State.
2. Property represented by shares, shares or other interests in a company or legal entity, the assets of which are principally created directly or through the intermediary of one or more other companies or legal entities, from immovable property situated in a Contracting State, or from rights in such property taxable in that State.
3. Property represented by movable property forming part of the assets of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State, or movable property relating to a fixed base which a resident of a Contracting State has in the other Contracting State for the purpose of performing independent personal services taxable in that other State.
4. Property of a resident of a Contracting State, represented by ships or aircraft operated by that resident in international traffic, and movable property connected with the operation of such ships or aircraft, shall be taxable only in that State.
5. All other items of property of a resident of a Contracting State shall be taxable only in that State.
Article 23. Elimination of double taxation
Article 23
Elimination of double taxation
1. In the case of France, double taxation is eliminated as follows:
a) Income derived from Russia which may be taxed or which is taxable only in that State in accordance with the provisions of the Convention shall be taken into account for the calculation of French tax when the recipient is resident in France and the income is not exempt from tax on companies under domestic French law. In this case, the Russian tax is not deducted from these incomes, and the recipient is entitled to a credit of this tax against the French tax. The amount of the offset is:
(i) on all income not listed in subparagraph (ii), the amount of the French tax corresponding to that income;
(ii) on income referred to in paragraph 5 of Article 6, Article 10, paragraphs 1 and 2 of Article 13, paragraph 3 of Article 15, Article 16, paragraphs 1 and 2 of Article 17 and paragraph 2 of Article 18, the amount of tax paid in Russia in in accordance with the provisions of these articles; this credit may not, however, exceed the amount of the French tax corresponding to these incomes.
b) A French resident who owns property that is taxed in Russia in accordance with the provisions of paragraphs 1 or 3 of Article 22 may also be taxed in France on that property. The French tax is calculated by deducting an amount of credit equal to the amount of tax paid in Russia on this property. This credit may not, however, exceed the amount of the French tax corresponding to this property.
c) It is understood that the expression "the amount of the French tax corresponding to these incomes" used in paragraph a) means:
(i) if the tax payable on those incomes is calculated at a proportional rate, a product equal to the sum of the net incomes in question multiplied by the rate actually applicable to them;
(ii) where the tax payable on those incomes is calculated on a progressive scale, a product equal to the sum of the net incomes in question multiplied by the rate deriving from the ratio between the tax actually payable on the aggregate net income that is taxable under French law, and the amount of that total net income.
This interpretation by analogy applies to the expression used in subparagraph (b) "the amount of tax corresponding to this property".
d) It is understood that the expression "amount of tax paid in Russia" used in subparagraphs a) and ), means the amount of Russian tax finally and actually paid on the income or property in question, in accordance with the provisions of this Convention, by a resident of France who receives these incomes or has at its disposal elements of this property.
2. With regard to Russia, double taxation is eliminated as follows.
Where a resident of Russia derives income or owns property which, in accordance with the provisions of this Convention, is taxable in France, the amount of tax on such income or such property payable in France shall be deducted from the Russian tax levied on the income or property of that resident. Such deduction, however, may not exceed the amount of the relevant taxes on income or property, calculated before the deduction in accordance with the legislation of Russia.
Article 24. Non-discrimination
Article 24
Non-discrimination
1. Natural persons having the nationality of a Contracting State shall not be subject in the other Contracting State to any taxation or corresponding obligation which is different or more burdensome than those to which natural persons having the nationality of that other State are or may be subject and who are in the same position, in particular with regard to residency.
This provision also applies, notwithstanding the provisions of Article 1, to natural persons who are not residents of one or both of the Contracting States.
2. a) Exemptions and other tax advantages provided by the laws of a Contracting State in favor of that Contracting State or its territorial authorities shall apply under the same conditions to the other Contracting State or its territorial authorities in respect of identical or similar activities.
b) The competent authorities of both Contracting States shall agree on a case-by-case basis for the purpose of applying the provisions of subparagraph a) to other public institutions established in one Contracting State which are identical or similar to public institutions established in the other Contracting State.
3. The taxation of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorable in that other State than the taxation of enterprises of that other State carrying on similar activities.
4. Except as provided in paragraph 1 of Article 9, paragraph 5 of Article 11 or paragraph 5 of Article 12, interest, royalties and other payments made by an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purposes of determining the taxable profits of such enterprise be deductible under the same conditions as if they were paid to a resident of the first-mentioned State. Similarly, the debts of an enterprise of a Contracting State to a resident of the other Contracting State shall, for the purposes of determining the taxable property of such an enterprise, be deductible under the same conditions as debts to a resident of the first-mentioned State.
5. Enterprises of a Contracting State, the capital of which is wholly or partly, directly or indirectly, owned or controlled by one or more residents of the other Contracting State, shall not be subject in the first-mentioned State to any taxation or obligation connected therewith, other or more onerous than taxation and the obligations connected with it to which other similar enterprises of that first-mentioned State are or may be subject.
6. The provisions of this Article shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State the personal deductions, reliefs and reductions in tax, by virtue of their marital status or dependents, which it grants to its own residents.
7. If, in addition to this Convention, a treaty, agreement or convention to which the Contracting States are parties contains non-discrimination or most-favored nation provisions, it is understood that such tax provisions do not apply.
8. The provisions of this article shall apply, notwithstanding the provisions of article 2, to taxes of any kind and denomination.
Article 25. Mutual agreement procedure
Article 25
mutual agreement procedure
1. If a person considers that the acts of one or both of the Contracting States result or will result in him being taxed not in accordance with the provisions of this Convention, he may, notwithstanding the remedies available under the domestic laws of those States, submit his declaration to the competent authority of that Contracting State, in which he is a resident or, if his case falls under paragraph 1 of Article 24, to the competent authority of the Contracting State of which he is a national. The application must be submitted within three years from the date of the first notification of acts leading to taxation not in accordance with the provisions of the Convention.
2. The competent authority shall endeavor, if it considers the application to be well founded and if it cannot itself reach a satisfactory solution, to resolve the matter by mutual agreement with the competent authority of the other Contracting State with a view to avoiding taxation inconsistent with the Convention. This agreement shall be carried out irrespective of the time limits provided for by the internal laws of the Contracting States.
3. The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising in the interpretation or application of the Convention. They may also come to an agreement in order to overcome difficulties in cases not covered by the Convention.
4. The competent authorities of the Contracting States may enter into direct contact with each other for the purpose of reaching an agreement in the manner indicated in the preceding paragraphs.
Article 26 Exchange of information
Article 26
Information exchange
1. The competent authorities of the Contracting States shall exchange information necessary for the implementation of the provisions of this Convention or the national laws of the Contracting States relating to taxes to which the Convention applies, insofar as the taxation provided for by these laws is not inconsistent with the Convention. The exchange of information is not limited to Article 1. Any information received by a Contracting State shall be treated as confidential in the same manner as information obtained under the national laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) engaged in the assessment or collection of taxes referred to in the Convention, the enforcement or prosecution in respect of these taxes or adjudication of claims in respect of these taxes. Such persons or bodies use the information only for these purposes. They may disclose this information in open court or in court decisions.
2. In no event shall the provisions of paragraph 1 be construed as imposing on either of the Contracting States an obligation:
a) to carry out administrative measures contrary to the laws and administrative practice of that or of the other Contracting State;
b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
c) provide information that would reveal any trade, industrial or professional secret or trade process, or information the disclosure of which would be contrary to his vital interests.
Article 27. Employees of diplomatic missions and consular offices
Article 27
Employees of diplomatic missions
and consular offices
The provisions of this Convention shall not affect the tax privileges of members of diplomatic missions and consular posts granted in accordance with the general rules of international law or the provisions of special agreements.
Article 28 Entry into force
Article 28
Entry into force
1. The Contracting States shall notify each other in writing through diplomatic channels of the completion of the procedures necessary for the entry into force of this Convention.
2. This Convention shall enter into force on the date of receipt of the last of the notifications provided for in paragraph 1, and its provisions shall apply:
(a) in respect of taxes withheld at source, to amounts assessed on or after the first day of January of the year next following the year in which the Convention enters into force;
(b) in respect of other taxes on income, on income for taxable periods beginning on or after the first day of January of the year next following the year in which the Convention enters into force;
(c) in respect of other taxes, to taxation, on the basis of taxable facts, which will take place from the first of January of the year next following the year in which the Convention enters into force.
3. The provisions of the Convention between the Government of the Union of Soviet Socialist Republics and the Government of the French Republic for the avoidance of double taxation of income of October 4, 1985, as well as the provisions of the letters of exchange of March 14, 1967 in relation to the tax regime on income from copyrights and licenses and the Agreement of 4 March 1970 between the Government of the Union of Soviet Socialist Republics and the Government of the French Republic on the avoidance of double taxation in the field of air and sea transport and all tax provisions included in treaties or agreements between the Governments of the Union of Soviet Socialist Republics and the French Republic will cease to have effect in relations between Russia and France in respect of any Russian or French tax in respect of which this Convention will enter into force in accordance with paragraph 2.
Article 29 Termination
Article 29
Termination
This Convention shall remain in force until denounced by one of the Contracting States. Each Contracting State may denounce the Convention through diplomatic channels at least six months before the end of any calendar year. In such a case, the Convention shall cease to have effect:
(a) in respect of taxes withheld at source, to amounts assessed on or after the first day of January of the year next following the year in which the Convention is denounced;
(b) in respect of other taxes on income to income for taxable periods beginning on or after the first day of January of the year following the year in which the Convention is denounced;
c) in respect of other taxes subject to taxation on the basis of taxable facts, which will take place from the first day of January of the year following the year in which the Convention is denounced.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto, have signed this Convention.
Done in Paris on November 26, 1996 in duplicate in Russian and French, both texts being equally authentic.
Protocol
Upon signing the Convention between the Government of the Russian Federation and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Tax Evasion and Violation of Tax Laws in Respect of Taxes on Income and Property, the undersigned agreed that the following provisions form an integral part of the Convention.
1. For the purposes of Article 4, the expression "resident of a Contracting State" includes the public offices of that State as defined in subparagraph (d) of paragraph 1 of Article 3.
2. For the purposes of Article 10, it is understood that a resident of Russia who receives dividends paid by a company that is resident of France may receive a refund of provisional tax on those dividends in the amount of that tax that the company actually paid on those dividends. . The full amount of tax withheld and refunded is treated as a dividend for the purposes of the Convention. It is taxed in Russia in accordance with the provisions of paragraph 1 of this article and in France in accordance with the provisions of paragraph 2 of the same article.
3. It is understood that the provisions of Article 21 shall not apply, in particular, to dividends, interest and income from copyrights and licenses as defined in , and , respectively. The provisions of Article 21 also do not apply to winnings that an individual receives from casino games.
4. a) In calculating the taxable income and profits of a permanent establishment of an enterprise which is a resident of a Contracting State, the following shall be deductible:
(i) interest and income from copyrights and licenses on which it incurs expenses for the purposes of its industrial or commercial activities, paid to a bank or other person and regardless of the term of the loan, but this deduction may not exceed the amount that would be established in the absence of special relations between the payer and the actual recipient of these incomes;
(ii) the wages, salaries, social contributions provided for by the laws of the other Contracting State and other payments at which it incurs expenses paid for the services rendered and other expenses at which it incurs expenses for the purposes of its industrial or commercial activities.
b) The provisions of subparagraph "a" shall apply to the taxable income and profits of a company or other taxable entity which is a resident of a Contracting State if:
(i) not less than 30 per cent of its capital is owned by one or more residents of the other Contracting State; And
(ii) the total amount of its share capital is not less than 500,000 French francs or its equivalent in another currency. The authorized capital consists of the joint participation of shareholders, participants and other members, including residents of Russia.
5. Where, under the internal laws of a Contracting State, companies which are residents of that State are permitted to determine their taxable profits by consoli- dation which, in particular, includes the results of branches which are residents of the other Contracting State or permanent other State, the provisions of the Convention shall not prevent the application of that law.
6. The provisions of paragraphs 2 and 7 of Article 24 apply to cultural centers established in accordance with the Agreement of November 12, 1992 between the Government of the Russian Federation and the Government of the French Republic on the establishment and types of activities of cultural centers.
7. Nothing in this Convention shall prevent or restrict France from applying to its residents the provisions of articles 209 B and 212 of its general tax code in respect of the prevention of tax evasion and violation of tax laws or the imposition of sanctions for tax evasion and violation of tax laws. or other similar provisions which might amend or replace the provisions of these articles.
8. In respect of income which is taxable under the provisions of the Convention only in the State of which the recipient is a resident, the other Contracting State shall make every effort to establish procedures to enable such income to be received without any taxation in that other State.
Where the Convention provides for taxation in the Contracting State in which the income arises, that State shall make every effort to establish procedures to enable residents of the other Contracting State to derive such income, net of the tax provided for in the Convention.
However, in the event that the tax has not been collected in accordance with the Convention, the request for reimbursement must be submitted before the end of the third calendar year following that in which the income was received. The tax administration of the Contracting State in which the revenues arise shall express its opinion on the admissibility of the request within two months following its presentation, and the tax collected in that State in excess of the tax prescribed by the Convention shall be refunded to the taxpayer in the month following that in which the request was received.
9. The competent authorities of the Contracting States may regulate the conditions for the application of the Convention, in particular with regard to the formalities for the enjoyment of the benefits provided for by the provisions of the Convention.
In witness whereof the undersigned, being duly authorized thereto, have signed the present minutes.
Done in Paris on November 26, 1996, in duplicate, each in Russian and French, both texts being equally authentic.
Ratified by the Federal Assembly (Federal Law of February 8, 1998 N 18-FZ - Collection of Legislation of the Russian Federation, 1998, N 7, Art. 789).
The Convention entered into force on 9 February 1999.
Electronic text of the document
prepared by CJSC "Kodeks" and checked against:
Collection of legislation
Russian Federation,
No. 21, May 24, 1999
Convention between the Government of the Russian Federation and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Tax Evasion and Violation of Tax Laws with Respect to Taxes on Income and Property
| Document's name: | Convention between the Government of the Russian Federation and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Tax Evasion and Violation of Tax Laws with Respect to Taxes on Income and Property |
| Type of document: | Convention |
| Host body: | Government of the Russian Federation State bodies and / or other subjects of law |
| Status: | current |
| Published: | Foreign capital in Russia: taxes, accounting, currency and customs regulations, magazine N 2, 1997 Collection of Legislation of the Russian Federation, N 21, 05/24/1999 |
| Acceptance date: | November 26, 1996 |
| Effective start date: | February 09, 1999 |
The international treaty referred to in Art. 7 of the Tax Code of the Russian Federation, in international law it can have various names: treaty, agreement, convention, etc.
The purpose of the conclusion international treaty is the achievement between states or other subjects of international law of an agreement establishing their mutual rights and obligations in tax relations in order to avoid double taxation.
The issues of taxation of persons - residents of one state in relation to their income paid in another state, are regulated by the legislation of these two countries. At the same time, any state has the exclusive right to levy taxes on its territory in accordance with national tax legislation, which also applies to foreign organizations.
The provisions of an international treaty determine the rules for delimiting the rights of each of the states to tax organizations of one state that have an object of taxation in another state.
In addition, amounts of tax paid in the source State in accordance with the internal tax laws of that State may be credited against the payment of tax by a foreign organization abroad. The procedure for offsetting taxes paid abroad is regulated by the tax legislation of a foreign state. In Russia, a similar procedure is applied, provided for in Art. 232,311 NKRF.
As a rule, the amount of creditable taxes paid in the source state cannot exceed the amount of tax payable by this organization abroad on the relevant income, calculated in accordance with the tax laws and regulations of the foreign state. The offset is made subject to the presentation by the taxpayer of a document confirming the withholding of tax in the state - the source of income.
In addition to eliminating double taxation, international agreements aim to develop mechanisms to prevent tax evasion and reduce the possibility of abuse of the rules of agreements to avoid paying taxes through the exchange of information between the competent authorities of the respective states.
Double taxation avoidance agreements (treaties, conventions)- multilateral and bilateral agreements establishing the norms in accordance with which the avoidance of double taxation is achieved:
income received by individuals and legal entities;
property and income from the sale of property;
income and property in the field of international transportation;
Double taxation in international economic relations may arise when calculating and paying:
1) personal income tax;
2) corporate income tax;
3) property tax (both individuals and legal entities, real estate tax, etc.).
Double tax treaties generally contain:
1) listing the types of taxes regulated by the agreement (article "Taxes covered by the agreement");
2) determination of the circle of persons to whom the agreement applies;
3) determination and establishment of taxation conditions (taxation restrictions) in the state - source of income of such types of income as:
income from dependent personal activities (income from employment);
income from independent personal activities (remuneration and fees);
other income;
profit from commercial activities;
dividends;
interest;
4) determination of ways to avoid double taxation (tax exemption or application of a foreign tax credit);
5) establishment of the procedure for the implementation of the agreement by the parties (entry into force, duration, procedure for termination, application of mutual agreement procedures).
Separate provisions of these agreements differ from each other, since the agreements are bilateral in nature and are concluded based on the nature of relations between Russia and a particular country. At the same time, many agreements are based on the model of the Organization for Economic Cooperation and Development (OECD) convention on taxes on income and capital and contain similar provisions.
In this regard, it is possible to generalize the principles of income taxation in accordance with international agreements.
The problem of tax deduction by two states at once is a rather relevant topic, since, due to various fundamentals of tax legislation in the countries of the world, many individuals who make a profit outside the territory of their homeland fall under a double deduction from them, they have to pay at the place of income and at the place of citizenship .
This is the deduction of taxes from the income of persons in several countries of the world - at the place of residence and at the place of formation of these incomes.
There is a collection of taxes in two areas in which the fiscal service works:
- According to the territorial principle - in such countries, tax collection takes place in a more loyal context, since they claim only income received within the country;
- According to the principle of residence - here the fee is designed to receive the maximum injection into the budget, since the tax is withdrawn from the resident, regardless of the place of receipt of his income.
A feature of such taxation in Russia is its definition according to special divisions with the presence of certain classification features.
How to eliminate double taxation - see this video:
Main varieties
Classification by principles
Taxation depends on the scheme used and is of the following types:
- International double economic type - is withdrawn from all entities simultaneously that received income from one operation, that is, their income is common. This is an initiative option to receive fees from a resident whose income was received abroad;
- An international double legal type is income received from a transaction performed by one person; tax is deducted from such a turnover by several states at once. In relation to this type, a set of special rules has been formed, according to which the jurisdiction of 2 states is divided for the operation, which means that it is necessary to establish relations between the states related to the income and the person who received it.
Important: such methods of avoiding double taxation are very effective for which states sign specialized agreements.
Classification by level
The classification feature is also affected by the level of the operation, depending on it, the following types can be formed:
- Internal - when the importance and level of the administrative-territorial unit within which the income was received matters, but at the same time it is carried out in any district.
In turn, this type is also subdivided according to the operations performed into channels:
- Vertical, according to which two types of tax must be paid - local and state;
- Horizontal - its feature is in an individual approach to each operation, depending on the region of its execution, that is, it is possible to pay only taxes carried out on the territory of a given municipality, it is possible to pay all taxes related to the operation or nationwide.
- External - outside the Russian Federation, in a similar situation, the codes of tax legislation of the two states collide, the taxpayer will have to satisfy the requirements of the fiscal services in both territories.
Negative aspects of taxation leading to controversy
Double taxation causes a lot of indignation on the part of citizens who are engaged in earning money abroad. Fiscal services, in turn, despite filling the state budget, seek to solve the problem, since citizens of their state suffer first of all from such a position.
- The division of the profit of the taxpayer by two states at once in the same period, which as a result is a considerable amount for the subject;
- The allocation of residents and non-residents is extremely problematic, for this it is necessary to create a new classification of income;
- The need to create a clear legal framework that strictly regulates the object of taxation for the possibility of recovery.
Important: it is precisely this kind of interaction that will help resolve the issue and find a compromise between the interests of the two states.
What is double taxation? Double Taxation Agreement
This is a pact between two states, which clearly indicates the rules for deducting taxes in cases where the object of profit is located in the territory of a country where the subject is not listed as a resident.
The need for it is the formation of a list of taxes that fall under the agreement, as well as a list of entities that are subjects of double tax deduction.
Also, such an agreement contains all the essential conditions - the validity period, the terms of taxation, the procedure for breaking off cooperation.
Important: Russia has 82 double tax treaties with other states.
The advantages of such arrangements are clear:
- This is the prevention of double or burdensome tax deductions;
- An effective tool that provides for the application of only positive sets of tax laws of the two countries;
- Opportunities for tax innovations, taking into account national tax laws;
- Minimization of rates;
- Fixation of residence and location of the object of income.
In this case, it should be understood what relief is:
- Will not allow you to avoid making mandatory payments;
- It has several directions and options for collecting contributions, and with the wrong approach, you can not reduce, but rather increase them;
- To use the agreement with benefit, it is necessary to take into account all the nuances of the country where the business is supposed to be located and the presence of an agreement signed with it from the native state.
Application of the agreement on the creation of special economic zones:
- Income and capital taxes;
- Individuals and legal entities, residents and non-residents.
The certificate must be accompanied by:
- Certificate of fee payment abroad, while it should be translated into the state language and certified by a notary;
- A document reflecting the type of income and its amount for the calendar year, it should also indicate the date of collection and its amount.
The declaration and tax receipt are also certified. Important: the application of the simplified taxation system provides for a double tax payment, since it is impossible to receive a credit from another country.
Taxation when selling foreign property
Until January 1, 2016, Russian law provided for the payment of tax on the sale of property abroad and within the country in the same amount, no exceptions were provided.
- The owner has owned the property for over 5 years;
- Received it according to a donation or cared for an incompetent family member who was the owner of the property, in such cases the property should have been owned for at least 3 years.
- At the same time, housing was not related to entrepreneurial activity.
Making profit from the sale of property
Making profit in this case occurs in the following steps:
- It should be sorted out whether the former owner is related to categories that are exempt from paying the fee;
- If not, it is necessary to draw up and submit a declaration by April 30 of the year following the receipt of income. You can read how to fill out a tax return in a general manner;
- Pay the fee by July 15 of the same year.
Important: in this case, the application of double taxation is also possible if the tax was calculated in the amount of 13% of the profit received.
Calculation of tax on the activities of an entrepreneur
According to existing rules, in the case of income in the territory of any country, the tax fee should be paid only to its treasury, but subject to the following points:
- Profit received through a permanent establishment;
- The person who received it is not a resident of another country.
At the same time, if income is received through a representative office, then the tax is withdrawn from the part that is received by the representative office.
In this case, it is necessary to understand and comply with the terms of representation:
- Representation can only be carried out through a permanent location, which is of a permanent nature, it cannot be a portable tent;
- The representative office may take the form of a complete project if it is envisaged to carry out work that requires relocation, for example, construction;
- Representation cannot be expressed in the person of an agent who has a residence in the country;
Important: at the same time, commerce must be carried out in full or in part through the specified location.
- If the premises are intended for the performance of auxiliary or temporary activities, then it cannot be considered a place of representation, in which case there can be no question of paying tax to the treasury of one state.
Important: if the management of auxiliary premises is carried out from the main office, then the foreign state where they are located does not have the right to levy taxes from the organization.
Conclusion
When receiving income from any activity abroad, one should take into account all the peculiarities of the tax laws of a given country, but at the same time remember that tax payments are mandatory in any case, and evasion of this procedure is a criminal offense. Paying tax abroad at a lower rate than at home and not filing for it is unacceptable.
In what order the Convention for the avoidance of double taxation is applied, you can see here:
International agreements for the avoidance of double taxation- international agreements that states conclude between themselves in order to exclude double taxation of income and property of citizens and organizations - once in one state and another time in another.
Example
A Russian organization pays dividends to a foreign organization. The Tax Code of Russia establishes that when paying dividends, a Russian organization, as a tax agent, must withhold and transfer tax to the budget at a rate of 15%.
A foreign country may also provide that dividends are taxed. In this case, the tax on the amount of dividends will be paid twice - once in Russia and the second time in a foreign country.
International agreements determine in which state the tax must be paid and in what amount.
Term Agreement (convention, treaty) for the avoidance of double taxation in English - Agreement (convention , treaty) for the avoidance of double taxation.
A comment
Russia has entered into agreements with many foreign countries on the avoidance of double taxation, which exclude double taxation of the same income or property in Russia and in a foreign state and determine in what amount and in which state the tax must be paid. There are many such agreements and they can be called an agreement, a convention, an agreement. Russia is one of the leaders in terms of the number of concluded international agreements on avoidance of double taxation, entering the TOP 5 countries.
Agreements have been concluded with most states. The Russian Federation does not conclude agreements with so-called offshore states. The list of agreements is constantly updated.
Part 4 of Article 15 of the Constitution of the Russian Federation determines that the generally recognized principles and norms of international law and international treaties of the Russian Federation are an integral part of its legal system. If an international treaty of the Russian Federation establishes other rules than those provided for by law, then the rules of the international treaty shall apply.
Accordingly, agreements on the avoidance of double taxation concluded by Russia with a foreign state have a higher legal force than the Tax Code of the Russian Federation. As a result, if Russian persons (legal entities or individuals) receive income from activities in another state or foreign persons receive income in Russia, then the rules of the agreement must be applied.
The same rule is repeated in Art. 7 of the Tax Code of the Russian Federation: “If an international treaty of the Russian Federation establishes other rules and norms than those provided for by this Code and regulatory legal acts adopted in accordance with it, the rules and norms of international treaties of the Russian Federation shall apply.”.
Example
A Russian organization pays dividends to a German organization. The Russian tax code specifies that dividends paid to foreign entities must be taxed at a rate of 15%. A Russian organization paying dividends is obliged to withhold and transfer the amount of tax to the Russian budget.
Russia concluded with Germany the Agreement dated 29.05.1996 "On the Avoidance of Double Taxation in Respect of Income and Property Taxes". Article 10 "Dividends" of the agreement defines:
"one. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in the Contracting State of which the company paying the dividends is a resident, in accordance with the laws of that Contracting State. The tax, however, must not exceed:
a) five per cent of the gross amount of the dividends, if the beneficial owner of them is a company which holds directly at least ten per cent of the share capital or share capital of the company paying the dividends and that equity interest is not less than EUR 80,000, or the equivalent amount in rubles;
b) fifteen percent of the gross amount of dividends in all other cases.”
Accordingly, if a German company owns 10% or more of the authorized or share capital of a Russian organization (paying dividends), and this share is not less than 80,000 euros or the equivalent amount in rubles, then a tax rate of 5% is applied.
Reduced tax rates and exemption
In the event that Russian organizations pay so-called passive income (dividends, interest, royalties) to foreign organizations, Russian organizations act as tax agents and are obliged to withhold and transfer tax to the budget at the rates provided for by the Tax Code of the Russian Federation. International agreements often establish reduced tax rates or even exemptions in this case.
To apply this exemption, a foreign organization must, before paying income, provide a Russian tax agent with confirmation that this foreign organization has a permanent location in the state with which the Russian Federation has an international treaty (agreement) governing taxation issues. This confirmation must be certified by the competent authority of the foreign state. If this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian (Article 312 of the Tax Code of the Russian Federation).
Important legal precedent
Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation of May 29, 2007 N 1646/07 in case N A40-5091 / 06-33-49
decision in favor of the taxpayer.
A Russian taxpayer paid income in 2002-2003 to a foreign organization established in Cyprus. The Russian organization had confirmations of the location of the foreign organization in the territory of Cyprus dated May 25, 1999 and May 27, 2004. The tax authority imposed a fine on the Russian tax agent due to the fact that, in the opinion of the tax authority, he was not entitled to apply the preferential tax rate under the international agreement, since on the date of income payment there was no confirmation of the location of the foreign organization.
The Supreme Arbitration Court of the Russian Federation ruled in favor of the taxpayer, considering that the presence of confirmations in 1999 and 2004 is sufficient to confirm the location of a foreign organization in 2002-2003.
Double tax treaties define the following main provisions:
A provision that the Agreement applies to persons who are residents of one or both of the Contracting States.
Definition of agreement terms
List of taxes to which the agreement applies. As a rule, these are direct taxes - income tax, income tax, property tax. Indirect taxes (VAT, excises, sales tax) are not the subject of such agreements and are levied by each state according to its own rules.
How is the tax residency of a person determined (for example, a person is a tax resident of Russia or a foreign state). In most cases, there are no difficulties with tax residency, but there are also difficult cases.
The concept of "Permanent Establishment" is defined. This concept is important because if a foreign organization operates in Russia through a permanent representative office, then it is recognized as a payer of income tax on profits received by the representative office in Russia. Moreover, the term "Permanent Establishment" does not depend on the official registration of a foreign organization. For example, many agreements provide that a building site or installation site is a permanent establishment only if the duration of its activity exceeds a certain period (for example, 12 months). Accordingly, if the construction site exists in Russia for 13 months, then the activity is considered as a permanent establishment.
procedural questions.
For each type of income and property, it is determined in which country the income (profit, property) will be taxed and at what rate. As a rule, allocate:
Income from real estate
Business profit
Income from international maritime and air transportation
Income from alienation of property
Income from independent personal services
Income from employment
Remuneration to members of supervisory boards and boards of directors
Income from the activities of artists and athletes
Income from public service activities
Teachers, students and other learning persons
Other income
Property
Indicates the inadmissibility of tax discrimination. For example - Nationals of a Contracting State may not be subjected in the other Contracting State to taxation or an obligation connected therewith which is different or more onerous than the taxation or obligations connected therewith to which nationals of that other State are or may be subjected under the same circumstances. This provision shall also apply to all legal persons, partnerships and other associations of persons formed under the laws in force in one of the Contracting States.
Procedure for elimination of double taxation. In Russia, for Russian organizations and individuals, the elimination of double taxation is carried out, as a rule, by offsetting in Russia the tax paid abroad - if a resident of the Russian Federation receives income or owns property that, in accordance with the provisions of the Agreement, may be taxed in a Foreign State , the amount of tax on such income or property paid in a Foreign State will be deducted from the tax levied on such person in the Russian Federation. Such deduction, however, may not exceed the amount of tax calculated on such income or property in accordance with the laws and regulations of the Russian Federation.
Example
The Russian organization received a profit in the amount of 100 thousand euros from the activities of its branch in a foreign country. In a foreign country, this profit was subject to income tax at a rate of 30%. The tax amounted to 30 thousand euros.
In Russia, income from such activities is subject to income tax at a rate of 20%. Given that the amount of tax under Russian rules was less than under the rules of a foreign state, as a result of the offset, tax on the profits of a foreign branch in Russia is not paid.
The Tax Code of the Russian Federation establishes a requirement that, when applying the provisions of international treaties of the Russian Federation, a foreign person must submit to the tax agent paying income confirmation that this foreign person has a permanent location in the state with which the Russian Federation has an international treaty (agreement) regulating issues taxation, which must be certified by the competent authority of the relevant foreign state. If this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian (Articles 312, 232 of the Tax Code of the Russian Federation).
Entry into force of the international treaty for the avoidance of double taxation
The date of entry into force of an international agreement on the avoidance of double taxation is determined in this agreement itself.
The entry into force is preceded by the so-called ratification international treaty. Ratification is, in fact, the adoption of an international treaty by the State Duma of Russia and is carried out in the form of a federal law (Article 14 of the Federal Law of July 15, 1995 N 101-FZ "On International Treaties of the Russian Federation").
After the adoption of the ratifying federal law, the President of the Russian Federation signs the instrument of ratification.
Then, Russia and a foreign state exchange instruments of ratification in accordance with Art. 19 of the Federal Law of July 15, 1995 N 101-FZ.
Example
Article 27 "Entry into force" of the Agreement between the Government of the Russian Federation and the Government of Australia dated 07.09.2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" determines:
"The Contracting States shall notify each other in writing through diplomatic channels of the completion by them of the appropriate procedures required for the entry into force of this Agreement. This The Agreement enters into force on the date of the last notice. and the provisions of this Agreement shall apply:
(a) in Australia:
(i) in respect of withholding tax on income derived by a non-resident, on income received on or after 1 July of the calendar year next following the year in which this Agreement enters into force;
(ii) in respect of other Australian tax, income or profits for any financial year beginning on or after 1 July in the calendar year next following the year in which this Agreement enters into force;
(b) in Russia:
with respect to tax years and periods beginning on or after January 1 of the calendar year following the year in which this Agreement enters into force."
Model Convention
The OECD has developed the so-called Model Convention (OECD Model Convention) - a template for an international agreement on the avoidance of double taxation. This document is used by many states as the basis for developing their agreements. The Model Convention was first published in 1963 and updated in 1977.
In turn, the UN has also developed a model convention (UN Model Convention) for agreements between developed and developing countries. The UN Model Convention was first published in 1980 and later updated more than once (2001, 2011, 2012). It is believed that the UN model convention takes into account the interests of developing countries more (in comparison with the OECD convention), as it provides more tax rights to states that receive investment in business from foreign countries.
History reference
In the 1920s, the League of Nations (League of Nations) recognized that the interaction of the tax systems of states can lead to double taxation - a situation where the same income (profit, property) is taxed twice - in one state and in another. A decision was made to eliminate double taxation by adopting harmonized international rules for taxation. So there were international agreements on avoidance of double taxation.
Agreements on the avoidance of double taxation of Russia with foreign countries
| State | Agreement | Effective date | Dividend rate | Interest rate | Royalty rate |
| Australia | Agreement between the Government of the Russian Federation and the Government of Australia dated 07.09.2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 17.12.2003 | 5% or 15% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Austria | Convention between the Government of the Russian Federation and the Government of the Republic of Austria dated April 13, 2000 "For the Avoidance of Double Taxation with Respect to Taxes on Income and Capital" | 30.12.2002 | 5% or 15% (Article 10 of the Agreement) | 0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Azerbaijan | Agreement between the Government of the Russian Federation and the Government of the Republic of Azerbaijan of 03.07.1997 "On the avoidance of double taxation in relation to taxes on income and property" | 03.07.1998 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Albania | Convention between the Government of the Russian Federation and the Government of the Republic of Albania dated 04/11/1995 "On the Avoidance of Double Taxation with Respect to Taxes on Income and Property" | 09.12.1997 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Algeria | Convention between the Government of the Russian Federation and the Government of the Algerian People's Democratic Republic dated March 10, 2006 "On the avoidance of double taxation with respect to taxes on income and property" | 18.12.2008 | 5% or 15% (Article 10 of the Agreement) | 15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Argentina | Convention between the Government of the Russian Federation and the Government of the Argentine Republic for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital | 16.10.2012 | 10% or 15% (Article 10 of the Agreement) | 15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Armenia | Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia of December 28, 1996 "On the Elimination of Double Taxation on Income and Property" | 17.03.1998 | 5% or 10% (Article 10 of the Agreement) | 0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Belarus | Agreement between the Government of the Russian Federation and the Government of the Republic of Belarus dated April 21, 1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 20.01.1997 |
15% (Article 9 of the Agreement) |
10% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) |
| Belgium | Convention between the Government of the Russian Federation and the Government of the Kingdom of Belgium of June 16, 1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 26.06.2000 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Bulgaria | Agreement between the Government of the Russian Federation and the Government of the Republic of Bulgaria dated 08.06.1993 "On the avoidance of double taxation with respect to taxes on income and property" | 08.12.1995 | 15% (Article 10 of the Agreement) |
15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Botswana | Convention between the Government of the Russian Federation and the Government of the Republic of Botswana dated April 8, 2003 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 23.12.2009 | 5% or 10% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Brazil | Convention between the Government of the Russian Federation and the Government of the Federative Republic of Brazil dated November 22, 2004 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 19.01.2009 | 10% or 15% (Article 10 of the Agreement) |
15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Great Britain | Convention between the Government of the Russian Federation and the Government of the United Kingdom of Great Britain and Northern Ireland dated February 15, 1994 "For the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income and Capital Gains" | 18.04.1997 | 10% (Article 10 of the Agreement) |
0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Hungary | Convention between the Government of the Russian Federation and the Government of the Republic of Hungary dated April 1, 1994 "On the avoidance of double taxation with respect to taxes on income and property" | 03.11.1997 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Venezuela | Convention between the Government of the Russian Federation and the Government of the Bolivarian Republic of Venezuela of December 22, 2003 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 19.01.2009 | 10%or 15% (Article 10 of the Agreement) |
10% or 15% (Article 12 of the Agreement) |
|
| Vietnam | Agreement between the Government of the Russian Federation and the Government of the Socialist Republic of Vietnam dated May 27, 1993 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 21.03.1996 | 10%or 15% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Germany | Agreement between the Russian Federation and the Federal Republic of Germany dated May 29, 1996 "On the avoidance of double taxation with respect to taxes on income and property" | 30.12.1996 | 5% or 15% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Greece | Convention between the Government of the Russian Federation and the Government of the Hellenic Republic of June 26, 2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 13.12.2007 | 5% or 10% (Article 10 of the Agreement) |
7% (Article 12 of the Agreement) |
|
| Denmark | Convention between the Government of the Russian Federation and the Government of the Kingdom of Denmark of February 8, 1996 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 27.04.1997 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Egypt | Agreement between the Government of the Russian Federation and the Government of the Arab Republic of Egypt dated September 23, 1997 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 06.12.2000 | 10% (Article 10 of the Agreement) |
15% (Article 12 of the Agreement) |
|
| Israel | Convention between the Government of the Russian Federation and the Government of the State of Israel dated April 25, 1994 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 07.12.2000 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| India | Agreement between the Government of the Russian Federation and the Government of the Republic of India dated March 25, 1997 "On the avoidance of double taxation with respect to taxes on income" | 11.04.1998 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Indonesia | Agreement between the Government of the Russian Federation and the Government of the Republic of Indonesia dated March 12, 1999 "On the avoidance of double taxation and the prevention of income tax evasion" | 17.12.2002 | 15% (Article 10 of the Agreement) |
15% (Article 12 of the Agreement) |
|
| Iran | Agreement between the Government of the Russian Federation and the Government of the Islamic Republic of Iran dated March 6, 1998 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 05.04.2002 | 5%, 10% (Article 10 of the Agreement) |
5% (Article 12 of the Agreement) |
|
| Ireland | Agreement between the Government of the Russian Federation and the Government of Ireland dated April 29, 1994 "On the avoidance of double taxation with respect to taxes on income" | 07.07.1995 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Iceland | Convention between the Government of the Russian Federation and the Government of the Republic of Iceland of November 26, 1999 "On the avoidance of double taxation and the prevention of tax evasion on income" | 21.07.2003 | 5% or 15% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Italy | Convention between the Government of the Russian Federation and the Government of the Italian Republic of 04/09/1996 "For the avoidance of double taxation with respect to taxes on income and capital and the prevention of tax evasion" | 01.01.1999 | 5% or 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Spain | Convention between the Government of the Russian Federation and the Government of the Kingdom of Spain dated 12/16/1998 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 13.06.2000 | 5% or 10% or 15% (Article 10 of the Agreement) |
5% (Article 12 of the Agreement) |
|
| Kazakhstan | Convention between the Government of the Russian Federation and the Government of the Republic of Kazakhstan dated 10/18/1996 "On the elimination of double taxation and the prevention of tax evasion on income and capital" | 29.07.1997 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Canada | Agreement between the Government of the Russian Federation and the Government of Canada dated 05.10.1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 05.05.1997 | 10% or 15% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Qatar | Agreement between the Government of the Russian Federation and the Government of the State of Qatar dated April 20, 1998 "On the avoidance of double taxation with respect to taxes on income" | 05.09.2000 | 5% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Cyprus | Agreement between the Government of the Russian Federation and the Government of the Republic of Cyprus dated 05.12.1998 "On the avoidance of double taxation with respect to taxes on income and capital" | 17.08.1999 | 5% or 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Kyrgyzstan | Agreement between the Government of the Russian Federation and the Government of the Kyrgyz Republic dated 01/13/1999 "On the avoidance of double taxation and the prevention of income tax evasion" | 06.09.2000 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| China | Agreement between the Government of the Russian Federation and the Government of the People's Republic of China dated May 27, 1994 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 10.04.1997 | 10% (Article 9 of the Agreement) |
10% (Article 11 of the Agreement) |
|
| North Korea | Agreement between the Government of the Russian Federation and the Government of the Democratic People's Republic of Korea dated September 26, 1997 "On the avoidance of double taxation with respect to taxes on income and capital" | 30.05.2000 | 10% (Article 10 of the Agreement) |
0% |
16.05.2016
Application of agreements on avoidance of double taxation concluded by the Russian Federation.
At present, double taxation avoidance agreements have been signed by Russia with more than 80 countries. Among them are many EU countries, including Cyprus, Great Britain, Denmark, the Netherlands; Switzerland; USA; China; CIS countries, incl. Ukraine, Belarus, Kazakhstan; the Baltic countries - Latvia, Lithuania and a number of others (see the List of valid double taxation agreements).
IMPORTANT: If an international tax agreement provides for a different tax rate than that provided for by the Tax Code of the Russian Federation, then the rate specified in the double taxation agreement is applied!
Let us dwell on some of the most significant aspects of the application of international tax treaties in Russia.
Duties of a tax agent
Responsibility for the correct calculation and withholding of tax at source (including the correct application of benefits (reduced rates and exemptions) provided for by international international tax agreements, lies with the tax agent.
According to the Tax Code of the Russian Federation, tax on income received by a foreign organization from sources in the Russian Federation, calculated and withheld by a Russian organization (tax agent), of the income-paying foreign organization, at each income payment, in the income payment currency. The exception is when:
- the income paid relates to the permanent establishment of the foreign organization receiving the income in the Russian Federation;
- in relation to income paid to a foreign organization, article 284 of the Tax Code of the Russian Federation provides for a tax rate of 0%;
- income, in accordance with international treaties of the Russian Federation, is not taxed in the Russian Federation (subject to the presentation by a foreign organization to the tax agent of the confirmation provided for in paragraph 1 of article 312 of the Tax Code of the Russian Federation);
- in some other cases, provided for in paragraph 2 of Art. 310 of the Tax Code of the Russian Federation.
It should be remembered that the unlawful non-withholding and (or) non-transfer (incomplete withholding and (or) transfer) within the period established by the Tax Code of the Russian Federation of tax amounts subject to withholding and transfer by a tax agent constitutes a tax offense and entails a fine of 20 percent of the amount, subject to withholding and (or) transfer (Article 123 of the Tax Code of the Russian Federation), as well as penalties (on the issue of collecting penalties from a tax agent, see Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation No. 4047/06 dated September 26, 2006).
Confirmation of the permanent location of a foreign organization
Subparagraph 4 of paragraph 2 of Article 310 of the Tax Code of the Russian Federation provides that in the event that a Russian organization pays income to a foreign organization for which, in accordance with international treaties (agreements), a preferential tax regime is provided in the Russian Federation, such income is exempted from withholding tax at the source of payment or tax withholding at the source of payment at reduced rates, subject to presentation by a foreign organization to a tax agent confirmation, provided for in paragraph 1 of Article 312 of the Tax Code of the Russian Federation.
In accordance with paragraph 1 of Art. 312 of the Tax Code of the Russian Federation, the specified confirmation must meet the following requirements:
- must be certified by the competent authority of the relevant foreign state,
- if this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian,
- confirmation must be provided by the foreign entity prior to the income payment date.
Thus, if at the time of payment of income to a foreign organization, the Russian organization - the source of income payment does not have the specified confirmation, then it is obliged to withhold tax at the source of payment at the rate established by law.
At the same time, if the specified confirmation appears at the disposal of the tax agent later, it is possible to refund the previously withheld tax on income paid to foreign organizations in accordance with paragraph 2 of Art. 312 of the Tax Code of the Russian Federation. To do this, the following documents must be submitted to the tax authority:
Application for refund of withheld tax in the prescribed form;
Confirmation that this foreign organization at the time of payment of income had a permanent location in the state with which the Russian Federation has an international treaty (agreement) regulating taxation issues;
Copies of the agreement (or other document) in accordance with which income was paid to a foreign legal entity, and copies of payment documents confirming the transfer of the amount of tax to be refunded to the budget;
An application for the refund of taxes previously withheld in the Russian Federation, as well as other documents listed above, shall be submitted by the foreign recipient of income to the tax authority at the place of registration of the tax agent within three years from the end date in which the income was paid.
The status of “beneficial recipient of income” as a condition for the application of benefits under double taxation agreements
When applying agreements for the avoidance of double taxation in terms of granting the right to use benefits (reduced rates and exemptions) when taxing certain types of income from sources in the Russian Federation, it is necessary to assess whether the person claiming the use of benefits (reduced rates and exemptions) , “the actual recipient (beneficial owner)” of the relevant income.
International tax treaties are based on the Model Convention on Taxes on Income and Capital) and on the official commentaries to it, containing the interpretation of its provisions.
When applying the provisions of tax treaties, it must be assumed that the term "beneficial recipient (beneficial owner) of income" is not used in a narrow technical sense, but should be understood based on the goals and objectives of international tax treaties, such as the avoidance of double taxation and evasion from the payment of taxes, and taking into account such basic principles of contracts as the prevention of abuse of the provisions of the contract and the predominance of essence over form. At the same time, the direct recipient of income, although it may qualify as a resident, cannot, for this reason alone, by default be considered as the beneficial owner of the income received in the state of residence.
Providing in the source state of income paid to a foreign person tax benefits (reduced rates and exemptions) is also contrary to the goals and objectives of international agreements, if the recipient of such income, without formally using such tools as agency or nominal holding, acts as an intermediate link in the interests of another the person who actually benefits from the relevant income. Such an intermediate, for example, a conduit company, cannot be considered as a beneficial owner of the income received if, despite its formal status as the owner of income in a transaction with a person who is a tax resident of the country - the source of income, such a company has very narrow powers in relation to this income, which allows it to be considered as a trustee or manager acting on behalf of interested parties.
In order to recognize a person as the actual recipient of income (beneficial owner), it is necessary not only to have legal grounds for direct receipt of income, but this person must also be immediate that is, the person who actually benefits from the income received and determines its further economic fate. When determining the actual recipient (beneficial owner) of income, one should also take into account the functions performed and the risks assumed by a foreign organization claiming benefits in accordance with international tax treaties.
Provided by agreements on avoidance of double taxation benefits (reduced rates and exemptions) in relation to paid income from a source in the Russian Federation do not apply if they are paid as part of a transaction or a series of transactions carried out in such a way that foreign person applying for benefits in the form of a reduced rate of interest and royalties, pays directly or indirectly all or almost all income (at any time and in any form) to another person who would not have the benefits (reduced rates and exemptions) under the relevant tax treaty, if such income was paid directly to such person.
Thus, the position of the Russian Ministry of Finance is that the benefits (reduced rates and exemptions) provided for by agreements on the avoidance of double taxation, when paying income in the form of dividends, interest and income from the use of copyright from sources in the Russian Federation, are applied only if a resident of a foreign state with which Russia has concluded a relevant agreement is the actual recipient of income.
Application of double tax treaties in other states
"Classic" offshore zones rarely have concluded double taxation agreements, which can be used to optimize income payments to non-resident structures. Therefore, low-tax and onshore jurisdictions, such as Cyprus, Great Britain, Denmark, the Netherlands, other European states, etc., are suitable for the application of tax treaties.
For instance, Great Britain has the world's largest network of tax treaties (more than 100). However, the application of tax treaties is possible only if the company is not nominal, that is, it is not an agent of an offshore principal company, which owns the majority of the profit (income). Only if the income is recognized as the income of an English company can it claim to use the agreement. Of course, it is not possible for a tax treaty to be applied by a company filing "dormant reports" - dormant accounts. It is possible to use agreements in holding schemes.
One of the countries most suitable for the application of international tax treaties, as before, remains Republic of Cyprus(has more than 40 active agreements). Tax residence certificate, issued by the Ministry of Finance at any time after the registration of the company. An important condition for obtaining a certificate is the presence of local directors - residents of Cyprus.
Tax residency certificates are also issued in other jurisdictions. significant for tax planning (Denmark, the Netherlands, Luxembourg, Latvia, Malta and other countries). However, an important factor affecting the possibility of obtaining a tax certificate is the presence of a company's "real content" (substance) in the country of registration.
Criteria for such presence. which a company must meet in order to be considered a tax resident of its country, may be the following:
- the presence of a real office at a real address in the country of registration of the company;
- the presence of local directors (residents of the country of registration of the company) who manage the company in the territory of this country;
- availability of a bank account (main) in a local bank;
- storage of financial documentation and reporting in an office in the country of registration of the company;
- availability of staff;
- implementation of real activities, etc.
The extent of such presence may vary depending on the objectives of the company (eg trading or holding activities).
