Russia And Malta Will Review The Terms Of The Convention On The Avoidance Of Double Taxation
Russia will review the Convention for the avoidance of double taxation with Malta. The government approved the draft Protocol for making changes, according to the White House (RF) website. That applies to increase the tax to 15% on dividends and interest.
The review of the agreements began as part of an order from Russian President Vladimir Putin, the government said. In March, during his address, he noted that companies with the help of offshore companies pay at rates below the personal income tax. For some companies, exceptions will apply, and they will be granted preferential treatment at a rate of 5%.
The government approved a draft Protocol to amend the Convention for the avoidance of double taxation with Malta. The adjustments relate to an increase in withholding tax on dividends and interest to 15%. Prime Minister Mikhail Mishustin signed the order.
The review of contracts with foreign partners is carried out as part of the instructions of President Vladimir Putin. In his address to the nation in March 2020, the head of state drew attention to the unfairness of taxation of income of companies from offshore jurisdictions at rates below the personal income tax. The President ordered that agreements with such countries be adjusted so that income paid abroad in the form of interest and dividends is taxed at the same rates as within Russia, i.e., 15%.
The Protocol, which was approved by Mikhail Mishustin, defines a list of exceptions, according to which a preferential regime will be applied to income in the form of dividends and interest, setting the tax rate at 5%.
They will apply to institutional investments, as well as to public companies that have at least 15% of their shares in free circulation and own at least 15% of the capital of the company paying the specified income during the year. The exceptions are due to the absence of risks of such taxpayers using foreign jurisdictions for tax evasion.
The Ministry of Finance was instructed to hold negotiations with the Maltese side and ensure the signing of the Protocol on amendments to the Convention on the avoidance of double taxation.
On September 8, Russia signed such a document with Cyprus. Ratification should take place before the end of 2020, and the Protocol's provisions will be applied from January 1, 2021. According to the Ministry of Finance, annual additional revenues to the Russian budget will amount to 150 billion rubles. Similar protocols should be signed with Luxembourg and the Netherlands.