Changes to the tax code of the Russian Federation shall specify the rules for DTT tax rates in respect of income paid out to Foreign Nominee holders.
Entitled investors under Foreign Nominee holders (FNH) will be able to benefit from a conditional tax rate under Double Taxation Treaties. Among others, the main points presented by the Russian State Duma in the draft are as follows:
- To apply the conditional tax rate on dividend payments under DTT, the FNH should disclose entitled investors (personal data or company name and other identification details) and provide the documents confirming conditions for the application of such a reduced tax rate. Among such conditions are the investment amount into the capital of the company and term of possession of shares.
- If the conditional tax rate was not applied due to non-provision of conditions and other information necessary for application of conditional tax rate the amount of over-paid tax may be refunded from the budget.
- Russian entities receiving interest through a Nominee Holder, Foreign Authorised Holder, or a Depositary Receipt Programme, should receive the full amount of interest payments without any deductions provided that the tax identification number of such a Russian entity was disclosed to the tax agent;
- It establishes that authorities may, at any time, request proper documentation from participants confirming the tax residency of the recipient of income, in order to validate applicability of preferential rates.
In order to become effective, the draft must be approved by parliament and enacted by the President. Currently only the unconditional tax rate under DTT may be applied to the income paid to the entitled investors under FNH. For application of this rate the aggregate disclosure is required from the FNH.
Contact:
Ksenia Liskina
Relationship Manager
Global Securities Services Russia
Ksenia.Liskina@unicredit.ru