In accordance with the Tax Code of the Russian Federation ("Russian Tax Code") and international Double Tax Treaty (DTT) agreements, actual income recipients the assets of which are held on beneficial owner accounts have to provide Certificate of Tax Residence issued in 2017 in order to benefit from tax exemption / tax reduction for their income stemming from sources within the Russian Federation.
Following the amendments to the Russian Tax Code, for the application of DTT tax rates a foreign entity is obliged to confirm to the tax agent its actual right to receive such income or alternatively to communicate the individuals / legal entities entitled to do so by presenting Beneficial Owner Representation. The latter is required only if the actual owners can benefit from the preferential DTT tax rate, otherwise only Certificate of Tax Residence may be submitted.
The Certificate of Tax Residence has to be provided in original, be valid for the calendar year of issue, as well as be legalised and apostilled. Investors need also to take into consideration that depending on the specific DTT conditions additional documents, such as purchase and sale agreements and other related documents can be required for tax exemption / tax reduction and be requested by the Russian tax authorities for the purposes of verification of the correct tax calculation.
The Beneficial Owner Representation can be delivered separately on case-by-case basis or placed as standing instruction vie SWIFT MT599 with validity until the end of 2017. The exact wording of the Beneficial Owner Representation (which was last updated in 2016) can be received from your Account Manager at UniCredit GSS Russia.
The provision of Certificates of Tax Residence for the underlying clients of foreign nominee account holders that safekeep securities on foreign nominee accounts is not required for the purpose of tax collection. However, such documents can be required by the Russian tax authorities during a tax audit in order to verify the correct tax calculation.
Please note that in order to benefit from a conditional DTT tax rate (dependent on the term and/or the size of the investment or any other condition), the following documents have to be submitted additionally: purchase and sale agreement for the shares, payment confirmation, confirmation of holdings at least 20% of the capital in the Russian company and any other documents that may be required.
In case of non-provision of Beneficial Owner Representation, the statutory tax rates of 15% for dividends and 20% for interest income will be applied.
Impact: Certificates of Tax Residence for 2017 and Beneficial Owner Representations have to be provided by foreign investors for the purposes of applying DTT tax rates.