In accordance with the Tax Code of the Russian Federation (Russian Tax Code) and with international Double Tax Treaties (DTT), actual recipients of income from assets held on beneficial owner accounts have to provide Certificates of Tax Residence (COTR) issued in 2016 in order to benefit from the available tax exemption / tax reduction with respect to the income coming from sources in the Russian Federation.
Following the amendments to the Russian Tax Code, for the purpose of application of the tax rates stipulated in the respective DTT, a foreign entity is obliged to confirm its actual right to receive such income to the tax agent or to report the other legal entities / private individuals entitled to such income through provision of Beneficial Ownership Representation (BOR).
BOR is required only if legal entities can benefit from the preferential DTT tax rate, otherwise only COTR is enough to be submitted.
COTR must be provided in original, be valid for the calendar year of issue, as well as be legalised and apostilled. Investors should also take into consideration that depending on the specific DTT provisions additional documents, such as purchase and sale agreements and other related documents may be required for tax exemption / tax reduction and may also be requested by the Russian tax authorities for the purposes of verification of correct tax calculation.
BOR can be provided on case-by-case basis or as standing SWIFT MT599 instruction valid until the end of 2016. For assistance in submitting your BOR, please contact your Account Manager at AO UniCredit Bank.
The provision of COTR for underlying clients of foreign nominee account holders is not required for the purposes of tax calculation and withholding. However, such documents can be required by the Russian tax authorities during tax audits for verifying the correct tax calculation.
To benefit from conditional DTT tax rates (such that depend on term, size of the investment, etc.), the following documents have to be additionally submitted to the Russian tax authorities: purchase and sale agreement of the shares (stake), payment confirmation, confirmation of holding at least 20% of the capital of a Russian company, and other documents.
In case of non-provision of BOR, statutory tax rates of 15% for dividends and 20% for interest income will be applied.
Impact on investors: Properly issued Certificate of Tax Residence for 2016 and Beneficial Owner Representation have to be provided by investors to AO UniCredit Bank for the purposes of applying reduced tax rates under applicable DTTs.