16.01.2017 Elena Kilinkarova, PhD, Counsel

Tax treaties in Russia: 2016 updates

Russia has a quite extensive network of tax treaties, with the vast majority of tax treaties being conventions for elimination of double taxation with respect to taxes on income and on capital and the prevention of tax evasion and avoidance ( here and after - double tax treaties). As of January, 1 2017 Russia has 82 double tax treaties in force.

In 2016 Russia has strengthened its tax cooperation with Asian countries and made steps towards automatic exchange of information.

The double tax treaty between Russia and Hong Kong was signed on January, 18 2016 and ratified later in 2016. The treaty applies in Russia since January, 1 2017. The treaty is expected to facilitate business and improve capital flows between Russia and Hong Kong, making Hong Kong a gateway for the flow of capital between Russia and Mainland China.

New double tax treaty with China and related protocols were ratified in January 2016. This treaty was signed in October 2014, replacing the treaty of 1994, and it applies in Russia since January, 1 2017. The new treaty was concluded because of the significant number of proposed changes to the existing treaty. The new treaty is expected to have a significant impact on economic cooperation between the two countries, encourage investment and reflect developments over the last 20 years.

In 2016 Russia ratified the protocol to amend the double tax treaty with Singapore, with the protocol being in force since January, 1 2017. The protocol makes substantial changes to the current treaty, including changes to the permanent establishment definition and the taxation of passive income in the form of dividends, interest and royalties.

For a long time double tax treaties have been the only legal grounds for exchange of information. Russia has signed Convention on Mutual Administrative Assistance in Tax Matters on November, 11 2011 and it took three years to ratify this convention on November, 4 2014. The Convention is in force for Russia since July, 1 2015.

Being a signatory to the above mentioned Convention, Russia has signed the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information in May 2016. Russia plans to start exchange of information in automatic regime in 2018 with respect to information of 2017. A draft for necessary amendments to the Tax Code was published for public discussion in 2016, but it hasn't been adopted by January, 1 2017.

In 2014 the Russian Government adopted the model tax information exchange agreement to develop tax cooperation with low tax jurisdictions. Still by January, 1 2017 no information is available on any negotiations conducted on the basis of this model, and Russia doesn't have any special bilateral agreements on exchange of information. Possibly it is due to the ratification of the Convention on Mutual Administrative Assistance in Tax Matters that gives wide opportunities for exchange of information with 108 jurisdictions.