According to the Law on Controlled Foreign Companies and the related changes to the Russian tax code, non-residents have to confirm their right to receive income from Russian securities to benefit from DTT rates starting from January 1, 2015. A non-resident is considered to be the actual recipient of income if it is the beneficial owner of such income and it has the right to determine its future economic use.
If a non-resident, who is receiving income, confirms the absence of actual rights on income, then the provisions of DTT can be applied to the actual recipient of income paid from securities communicated by the non-resident account holder. If such actual recipient of income is a resident of the Russian Federation, the income paid is taxed under the Russian Tax Code rules stipulated for the Russian tax residents.
A non-resident company which is not a beneficial owner of income will not have the right for the preferential tax treatment and rates under a respective DTT. The statutory tax rates - 15% for dividends and 20% for coupon payments on corporate bonds – should be applied by the tax agent.
The new DTT taxation rules are applied to the non-residents who have beneficial owner securities accounts and are not applied to foreign nominee account holders.
For more details of the law please refer to the following article from GSS Newsletter December 2014 Issue: State Duma adopts fradt law on Controlled Foreign Companies.
Impact on investors: To benefit from DTT rates non-residents should confirm their actual right to receive income from Russian securities or communicate the information on actual recipients of income to the tax agents.