Exempting from withholding tax in Russia certain types of income
Dear colleagues,
Please be informed that on September 29, 2023, a draft law was introduced to the Russian parliament, exempting from withholding tax in Russia certain types of income derived by foreign entities that are residents of the states, with which Russia has suspended a double tax treaty (DTT).
According to the draft law (https://sozd.duma.gov.ru/bill/448566-8), no withholding tax will be charged in Russia in respect of certain types of foreign companies’ income that were not previously subject to withholding tax under the relevant DTT that has been suspended by the Decree of the Russian President dated August 8, 2023. A foreign entity would still be required to provide a certificate of residence and a beneficial ownership confirmation letter to the Russian entity that is a tax agent.
In particular, this tax exemption will apply to the following types of income:
- income from the granting of rights to broadcast major international and foreign sports events and of the right to use international entertainment and sports content.
The prerequisite is that a Russian entity that pays income and a foreign entity that receives that income must not be interdependent;
- royalties payable under license agreements for the granting of the right to use software and other intangible assets that have no analogs in Russia.
The prerequisites are that:
- the license agreement was made before the adoption of the Decree of the Russian President dated August 8, 2023;
- a Russian entity that pays income and a foreign entity that receives that income must not be interdependent;
The provisions of the draft law on exempting the income of a foreign entity from withholding tax will apply retrospectively—i.e., starting from August 8, 2023.
The draft law is now going through preliminary consideration. We will be monitoring the passage of the bill and let you know when it is passed.
If you have any questions left or you would like to discuss something, please send an email to Anton Kabakov.
Best regards,