Getting income from a source abroad is often associated with the need to pay "profit" tax under the rules of local tax laws. But the mere fact of paying a foreign tax does not exempt a resident of the Russian Federation from the need to pay off the budget of his native state. However, situations where the same income is subject to tax twice do not always arise. With a number of countries, the Russian Federation has agreements on the avoidance of double taxation. These documents provide for the collection of tax only once, and do not double the mandatory deductions from income received from foreign economic transactions.
Which countries have an agreement on avoidance of double taxation?
Any income taxes can potentially be “doubled” - personal income tax, income tax, simplified tax on the simplified tax system, if the source of income payment is a foreign payer, and the recipient is a resident of the Russian Federation. Each country has its own laws related to the procedure for calculating taxes. Accordingly, income abroad can be taxed at a variety of rates, regardless of what tax and at what rate the same income may be subject to in Russia.
But, focusing on the method of eliminating double taxation, based on work under the relevant agreement, a company, individual entrepreneur or individual will not pay a double amount of the budget allocation. Of course, if the deal is concluded with a representative of the state in which the Russian Federation has this agreement.
At the moment, the Russian Federation has agreements with such countries as, for example, Belarus, Kazakhstan, Tajikistan, USA, Canada, Germany, France, Israel, Egypt, Japan, China, Australia. In total, as of January 1, 2017, there are 82 such countries with which we have agreements on the elimination of double taxation, and all of them are listed in the relevant information letter of the Ministry of Finance.
Evidence of resident status
The issue of eliminating double taxation is especially relevant, perhaps, in relations with companies from neighboring countries, for example, Kazakhstan and Belarus, since it is with them that Russian business develops in Lately the closest ties. How does it work in practice?
Suppose that a Russian company provides some services to an organization registered in Belarus, with which the Russian Federation has an appropriate agreement on the avoidance of double taxation.
When transferring payment in the described situation, the Belarusian side is obliged by default to withhold from the income of a foreign counterparty in relation to it the amount of tax at a rate of 15% - it is established by the Tax Code of the Republic of Belarus. As a result, the executing company receives income minus the amount of tax, and in this case it does not have to pay the repeated tax in Russia.
But there is another option - to provide the Belarusian counterparty with a certificate of residence in the Russian Federation. In this case, the contracting authority will have confirmation that the executing organization is indeed a Russian company and, therefore, is subject to the agreement. On the basis of such a certificate, the income is transferred in full, without any deductions, and the Russian company will pay the budget in accordance with the Russian Tax Code. Moreover, if such a company operates within the framework of the STS-6%, then paying tax with us is obviously more profitable, and vice versa, if this is a company on a general taxation system with a rate of 20%, the amount of tax will be higher if it is paid to the budget of the Russian Federation .
One way or another, a residence certificate is a document on the basis of which a foreign partner does not tax the amount of income paid to a Russian organization in accordance with the taxes applicable in its territory.
Certificate of confirmation of residence of the Russian Federation
The procedure for confirming the status of a resident of the Russian Federation was approved in the Information Notice of the Federal Tax Service of Russia dated November 23, 2012. Since February 2008, the Interregional Inspectorate of the Federal Tax Service of Russia for Centralized Data Processing, abbreviated as the MI of the Federal Tax Service of Russia for the Data Center, has been processing documents confirming this status.
There is no form for requesting confirmation of resident status - its companies, individual entrepreneurs and individuals are drawn up in free form, but with the obligatory indication of the calendar year for which confirmation is required, the name of the foreign state with whose representative there is cooperation, as well as the name and details of the Russian taxpayer itself.
In most cases, a certificate of the established form is issued to confirm the status of a Russian resident. However, depending on which country the domestic company works with, this may also be a form of document approved by a foreign state. In such cases, the form is certified by the signature of the official and the seal of the Russian tax authority.
The procedure itself is quite lengthy. The term for consideration of applications for issuing a confirmation of the status of a resident is 30 calendar days from the date of submission to the MI of the Federal Tax Service of Russia for the data center of the request, as well as additional necessary documents.
A certificate confirming the status of a resident is usually issued for the current calendar year, but it can also be requested for past periods.
A tax resident of Russia, who is obliged to pay tax in the Russian Federation on income from assets worldwide, is one who lives in the country for more than 183 days a year. In particular, this definition includes many owners of overseas real estate, who may receive rental income or from the sale of housing. If they are Russian tax residents, then a situation arises in which they must pay taxes both abroad (at the location of the object) and in Russia (at the place of their tax residence). However, the tax cannot be levied twice: it is paid only abroad, and the difference is credited in Russia. This is provided for by double tax treaties.
Double tax treaty - what is it?
A double tax treaty is an agreement between two countries that establishes the rules by which taxes are levied on organizations and individuals in cases where the income-generating assets are not located in the country of residence of the recipient of the income.
The double taxation agreement specifies the types of taxes that fall under the document, as well as the circle of persons to whom its rules apply. Also in such an agreement are the terms of taxation, the validity period and the procedure for terminating the contract. Russia has concluded agreements on avoidance of double taxation with 82 countries.
| Australia Austria Azerbaijan Albania Algeria Argentina Armenia Belarus Belgium Bulgaria Botswana Great Britain Hungary Venezuela Vietnam Germany Hong Kong (since 01/01/2017) Greece Denmark Egypt |
Israel India Indonesia Iran Ireland Iceland Spain Italy Kazakhstan Canada Qatar Cyprus Kyrgyzstan China North Korea Korea Cuba Kuwait Latvia Lebanon |
Lithuania Luxembourg Macedonia Malaysia Mali Malta Morocco Mexico Moldova Mongolia Namibia Netherlands New Zealand Norway Poland Portugal Romania Saudi Arabia Serbia Singapore Syria |
Slovakia Slovenia USA Tajikistan Thailand Turkmenistan Turkey Uzbekistan Ukraine Philippines Finland France Croatia Montenegro Czech Chile Switzerland Sweden Sri Lanka South Africa Japan |
“As for, for example, income in Estonia or other countries with which Russia has not concluded an agreement on the avoidance of double taxation, residents of the Russian Federation pay taxes twice, in both countries. If Estonian legislation provides for the collection of tax from a non-resident, then the amount paid will not be taken into account in the Russian Federation, since the actually paid amounts of tax on income received in a foreign state are not counted when paying tax in Russia, unless otherwise provided by the relevant international treaty signed by the Russian Federation ”, says Tranio lawyer Ekaterina Shabalina.
For buyers and owners of foreign real estate, double taxation agreements are important primarily because they allow tax to be deducted in Russia on rental income and on the sale of such property.
How tax is taken into account when receiving rental income
“If a Russian resident receives income from real estate located, for example, in Germany, the amount of tax paid in Germany will be deducted from the amount of tax payable in Russia. The amount of tax is calculated in accordance with Russian tax law (at a rate of 13% and established rules) and is deducted from the amount of foreign tax paid. It should be remembered that the deduction cannot exceed the amount of tax calculated in Russia. Accordingly, if the amount of tax in the source state was paid in a smaller amount than was calculated in Russia, then the missing part will have to be paid in the Russian Federation, ”explains Ekaterina Shabalina.
If you receive rental income, you must declare it yourself in Russia by submitting to the tax authority at the place of residence a declaration in the form 3-NDFL (sheet "B", or income from sources outside Russian Federation).
Attached to the tax return:
- foreign tax documents issued confirming the amount of income received and tax paid from it, as well as their notarized translation into Russian. These documents must reflect the type of income, its amount, the calendar year in which the income was received, the amount of tax and the date of its payment.
- or a copy of the tax return filed abroad, with a copy of the tax payment document (all this must also be translated into Russian and notarized).
“The amount of tax paid abroad is credited only after the submission of this declaration, at the end of the tax period. You can claim income and receive a tax credit within three years after the end of the reporting year in which the income was received,” says Ekaterina Shabalina.
For example, a Russian tax resident owns German real estate that generates €10,000 per year in rental income. The amount of income tax in Germany will be 2,324 euros (rate - 23.24% of rental income, taking into account the surcharge in support of solidarity), in Russia - 1,300 euros (13%). Since the amount of 1,300 euros is less than 2,324, the property owner will not have to pay anything extra in the Russian Federation.
At the same time, deductions received abroad are not taken into account when calculating the taxable amount in Russia. Let's say a Russian rents out a house in France and receives 18,000 euros a year. According to French law, he has the right to deduct 50% of the taxable amount in connection with the cost of maintaining housing. Therefore, €9,000 is taxed on rental income. The minimum rate for non-residents is 20%. This means that a Russian citizen pays a tax in the amount of 1,800 euros per year. Since Russia does not have such a system of tax deductions, you would have to pay from the full amount of 18 thousand euros at a rate of 13%, that is, 2,340 euros per year. But since there is an agreement between Russia and France on the avoidance of double taxation, a Russian citizen needs to pay tax in France, and in the Russian Federation only pay the difference - 540 euros.
It is also important to know that when paying tax in Russia under the simplified taxation scheme, you cannot get a credit for foreign tax, and taxation in this case will be double.
How tax is taken into account when selling overseas property
According to the letter of the Federal Tax Service No. ED-3-3 / [email protected] dated November 9, 2012, the legislation of the Russian Federation does not distinguish between the sale of real estate in Russia and abroad - in both cases, the same rules apply.
According to Ekaterina Shabalina, the income received from the sale of foreign real estate is not subject to taxation, and the seller is not required to file tax return in Russia in two cases:
- for objects purchased before January 1, 2016: if a property is being sold that has been owned for more than three years;
- for objects purchased after January 1, 2016: if real estate is sold that has been owned for more than five years (general case) or three years (if the taxpayer received the object by inheritance or as a gift from a relative or family member, under a life maintenance agreement with a dependent) .
Exemption from tax can be obtained if the property is not used for business activities. The definition of entrepreneurial activity is given by the Federal Tax Service in letter No. ED-3-3 / [email protected] dated February 8, 2013.
If the seller does not fall under the above conditions, then he needs to file a tax return in the form of 3-NDFL by April 30 of the year following the year of receipt of income, and pay tax by July 15.
Like tax on rental income, tax on sales income can be credited in Russia as part of the elimination of double taxation. For Russian residents, the rate is 13%.
For example, in 2010 a Russian resident decided to buy an apartment in Spain for 500 thousand euros, and in 2016 he sold it for 550 thousand euros. Capital gains - 50 thousand euros - are subject to Spanish tax at a rate of 24%. The amount of tax in this case is 12 thousand euros. Since more than three years have passed between the purchase and sale, according to Russian law, it is not necessary to file a declaration in the Russian Federation, it is enough to pay tax in Spain.
It is important to remember that tax evasion is a criminal offence. It is illegal to pay taxes abroad at a lower rate than in Russia, and not fill out a tax return at home.
Julia Kozhevnikova, Tranio
International agreements for the avoidance of double taxation- international agreements that states conclude between themselves in order to exclude double taxation of income and property of citizens and organizations - once in one state and another time in another.
Example
A Russian organization pays dividends to a foreign organization. The Tax Code of Russia establishes that when paying dividends, a Russian organization, as a tax agent, must withhold and transfer tax to the budget at a rate of 15%.
A foreign country may also provide that dividends are taxed. In this case, the tax on the amount of dividends will be paid twice - once in Russia and the second time in a foreign country.
International agreements determine in which state the tax must be paid and in what amount.
Term Agreement (convention, treaty) for the avoidance of double taxation on the English language - Agreement (convention , treaty) for the avoidance of double taxation.
A comment
Russia has entered into agreements with many foreign countries on the avoidance of double taxation, which exclude double taxation of the same income or property in Russia and in a foreign state and determine in what amount and in which state the tax must be paid. There are many such agreements and they can be called an agreement, a convention, an agreement. Russia is one of the leaders in terms of the number of concluded international agreements on avoidance of double taxation, entering the TOP 5 countries.
Agreements have been concluded with most states. The Russian Federation does not conclude agreements with so-called offshore states. The list of agreements is constantly updated.
Part 4 of Article 15 of the Constitution of the Russian Federation determines that generally recognized principles and norms international law and international treaties of the Russian Federation are an integral part of its legal system. If an international treaty of the Russian Federation establishes other rules than statutory, then the rules of the international treaty apply.
Accordingly, agreements on the avoidance of double taxation concluded by Russia with a foreign state have a higher legal force than the Tax Code of the Russian Federation. As a result, if Russian persons (legal entities or individuals) receive income from activities in another state or foreign persons receive income in Russia, then the rules of the agreement must be applied.
The same rule is repeated in Art. 7 of the Tax Code of the Russian Federation: “If an international treaty of the Russian Federation establishes other rules and norms than those provided for by this Code and regulatory legal acts adopted in accordance with it, the rules and norms of international treaties of the Russian Federation shall apply.”.
Example
A Russian organization pays dividends to a German organization. The Russian tax code specifies that dividends paid to foreign entities must be taxed at a rate of 15%. A Russian organization paying dividends is obliged to withhold and transfer the amount of tax to the Russian budget.
Russia concluded with Germany the Agreement dated 29.05.1996 "On the Avoidance of Double Taxation in Respect of Income and Property Taxes". Article 10 "Dividends" of the agreement defines:
"one. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in the Contracting State of which the company paying the dividends is a resident, in accordance with the laws of that Contracting State. The tax, however, must not exceed:
a) five per cent of the gross amount of the dividends, if the beneficial owner of them is a company which holds directly at least ten per cent of the share capital or share capital of the company paying the dividends and that equity interest is not less than EUR 80,000, or the equivalent amount in rubles;
b) fifteen percent of the gross amount of dividends in all other cases.”
Accordingly, if a German company owns 10% or more of the authorized or share capital of a Russian organization (paying dividends), and this share is not less than 80,000 euros or the equivalent amount in rubles, then a tax rate of 5% is applied.
Reduced tax rates and exemption
In the event that Russian organizations pay so-called passive income (dividends, interest, royalties) to foreign organizations, Russian organizations act as tax agents and are obliged to withhold and transfer tax to the budget at the rates provided for by the Tax Code of the Russian Federation. International agreements often establish reduced tax rates or even exemptions in this case.
To apply this exemption, a foreign organization must, before paying income, provide a Russian tax agent with confirmation that this foreign organization has a permanent location in the state with which the Russian Federation has an international treaty (agreement) governing taxation issues. This confirmation must be certified by the competent authority of the foreign state. If this confirmation is foreign language, the tax agent is also provided with a translation into Russian (Article 312 of the Tax Code of the Russian Federation).
Important legal precedent
Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation of May 29, 2007 N 1646/07 in case N A40-5091 / 06-33-49
decision in favor of the taxpayer.
A Russian taxpayer paid income in 2002-2003 to a foreign organization established in Cyprus. The Russian organization had confirmations of the location of the foreign organization in the territory of Cyprus dated May 25, 1999 and May 27, 2004. The tax authority imposed a fine on the Russian tax agent due to the fact that, in the opinion of the tax authority, he was not entitled to apply the preferential tax rate under the international agreement, since on the date of income payment there was no confirmation of the location of the foreign organization.
The Supreme Arbitration Court of the Russian Federation ruled in favor of the taxpayer, considering that the presence of confirmations in 1999 and 2004 is sufficient to confirm the location of a foreign organization in 2002-2003.
Double tax treaties define the following main provisions:
A provision that the Agreement applies to persons who are residents of one or both of the Contracting States.
Definition of agreement terms
List of taxes to which the agreement applies. As a rule, these are direct taxes - income tax, income tax, property tax. Indirect taxes (VAT, excises, sales tax) are not the subject of such agreements and are levied by each state according to its own rules.
How is the tax residency of a person determined (for example, a person is a tax resident of Russia or a foreign state). In most cases, there are no difficulties with tax residency, but there are also difficult cases.
The concept of "Permanent Establishment" is defined. This concept is important because if a foreign organization operates in Russia through a permanent representative office, then it is recognized as a payer of income tax on profits received by the representative office in Russia. Moreover, the term "Permanent Establishment" does not depend on the official registration of a foreign organization. For example, many agreements provide that a building site or installation site is a permanent establishment only if the duration of its activity exceeds a certain period (for example, 12 months). Accordingly, if the construction site exists in Russia for 13 months, then the activity is considered as a permanent establishment.
procedural questions.
For each type of income and property, it is determined in which country the income (profit, property) will be taxed and at what rate. As a rule, allocate:
Income from real estate
Business profit
Income from international maritime and air transportation
Income from alienation of property
Income from independent personal services
Income from employment
Remuneration to members of supervisory boards and boards of directors
Income from the activities of artists and athletes
Income from public service activities
Teachers, students and other learning persons
Other income
Property
Indicates the inadmissibility of tax discrimination. For example - Nationals of a Contracting State may not be subjected in the other Contracting State to taxation or an obligation connected therewith which is different or more onerous than the taxation or obligations connected therewith to which nationals of that other State are or may be subjected under the same circumstances. This provision shall also apply to all legal persons, partnerships and other associations of persons formed under the laws in force in one of the Contracting States.
Procedure for elimination of double taxation. In Russia, for Russian organizations and individuals, the elimination of double taxation is carried out, as a rule, by offsetting in Russia the tax paid abroad - if a resident of the Russian Federation receives income or owns property that, in accordance with the provisions of the Agreement, may be taxed in a Foreign State , the amount of tax on such income or property paid in a Foreign State will be deducted from the tax levied on such person in the Russian Federation. Such deduction, however, may not exceed the amount of tax calculated on such income or property in accordance with the laws and regulations of the Russian Federation.
Example
The Russian organization received a profit in the amount of 100 thousand euros from the activities of its branch in a foreign country. In a foreign country, this profit was subject to income tax at a rate of 30%. The tax amounted to 30 thousand euros.
In Russia, income from such activities is subject to income tax at a rate of 20%. Given that the amount of tax under Russian rules was less than under the rules of a foreign state, as a result of the offset, tax on the profits of a foreign branch in Russia is not paid.
The Tax Code of the Russian Federation establishes a requirement that, when applying the provisions of international treaties of the Russian Federation, a foreign person must submit to the tax agent paying income confirmation that this foreign person has a permanent location in the state with which the Russian Federation has an international treaty (agreement) regulating issues taxation, which must be certified by the competent authority of the relevant foreign state. If this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian (Articles 312, 232 of the Tax Code of the Russian Federation).
Entry into force of the international treaty for the avoidance of double taxation
The date of entry into force of an international agreement on the avoidance of double taxation is determined in this agreement itself.
The entry into force is preceded by the so-called ratification international treaty. Ratification is, in fact, the acceptance of an international treaty State Duma Russia and is carried out in the form of a federal law (Article 14 of the Federal Law of July 15, 1995 N 101-FZ "On International Treaties of the Russian Federation").
After the adoption of the ratifying federal law, the President of the Russian Federation signs the instrument of ratification.
Then, Russia and a foreign state exchange instruments of ratification in accordance with Art. nineteen federal law dated 15.07.1995 N 101-FZ.
Example
Article 27 "Entry into force" of the Agreement between the Government of the Russian Federation and the Government of Australia dated 07.09.2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" defines:
"The Contracting States shall notify each other in writing through diplomatic channels of the completion by them of the appropriate procedures required for the entry into force of this Agreement. This The Agreement enters into force on the date of the last notice. and the provisions of this Agreement shall apply:
(a) in Australia:
(i) in respect of withholding tax on income derived by a non-resident, on income received on or after 1 July of the calendar year next following the year in which this Agreement enters into force;
(ii) in respect of other Australian tax, income or profits for any financial year beginning on or after 1 July in the calendar year next following the year in which this Agreement enters into force;
(b) in Russia:
with respect to tax years and periods beginning on or after January 1 of the calendar year following the year in which this Agreement enters into force."
Model Convention
The OECD has developed the so-called Model Convention (OECD Model Convention) - a template for an international agreement on the avoidance of double taxation. This document is used by many states as the basis for developing their agreements. The Model Convention was first published in 1963 and updated in 1977.
In turn, the UN has also developed a model convention (UN Model Convention) for agreements between developed and developing countries. The UN Model Convention was first published in 1980 and later updated more than once (2001, 2011, 2012). It is believed that the UN model convention takes into account the interests of developing countries more (in comparison with the OECD convention), as it provides more tax rights to states that receive investment in business from foreign countries.
History reference
In the 1920s, the League of Nations (League of Nations) recognized that the interaction of the tax systems of states can lead to double taxation - a situation where the same income (profit, property) is taxed twice - in one state and in another. A decision was made to eliminate double taxation by adopting harmonized international rules for taxation. So there were international agreements on avoidance of double taxation.
Agreements on the avoidance of double taxation of Russia with foreign countries
| State | Agreement | Effective date | Dividend rate | Interest rate | Royalty rate |
| Australia | Agreement between the Government of the Russian Federation and the Government of Australia dated 07.09.2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 17.12.2003 | 5% or 15% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Austria | Convention between the Government of the Russian Federation and the Government of the Republic of Austria dated April 13, 2000 "For the Avoidance of Double Taxation with Respect to Taxes on Income and Capital" | 30.12.2002 | 5% or 15% (Article 10 of the Agreement) | 0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Azerbaijan | Agreement between the Government of the Russian Federation and the Government of the Republic of Azerbaijan of 03.07.1997 "On the avoidance of double taxation in relation to taxes on income and property" | 03.07.1998 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Albania | Convention between the Government of the Russian Federation and the Government of the Republic of Albania dated 04/11/1995 "On the Avoidance of Double Taxation with Respect to Taxes on Income and Property" | 09.12.1997 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Algeria | Convention between the Government of the Russian Federation and the Government of the Algerian People's Democratic Republic dated March 10, 2006 "On the avoidance of double taxation with respect to taxes on income and property" | 18.12.2008 | 5% or 15% (Article 10 of the Agreement) | 15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Argentina | Convention between the Government of the Russian Federation and the Government of the Argentine Republic for the Avoidance of Double Taxation with Respect to Taxes on Income and Capital | 16.10.2012 | 10% or 15% (Article 10 of the Agreement) | 15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Armenia | Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia of December 28, 1996 "On the Elimination of Double Taxation on Income and Property" | 17.03.1998 | 5% or 10% (Article 10 of the Agreement) | 0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Belarus | Agreement between the Government of the Russian Federation and the Government of the Republic of Belarus dated April 21, 1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 20.01.1997 |
15% (Article 9 of the Agreement) |
10% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) |
| Belgium | Convention between the Government of the Russian Federation and the Government of the Kingdom of Belgium of June 16, 1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 26.06.2000 | 10% (Article 10 of the Agreement) | 10% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Bulgaria | Agreement between the Government of the Russian Federation and the Government of the Republic of Bulgaria dated 08.06.1993 "On the avoidance of double taxation with respect to taxes on income and property" | 08.12.1995 | 15% (Article 10 of the Agreement) |
15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Botswana | Convention between the Government of the Russian Federation and the Government of the Republic of Botswana dated April 8, 2003 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 23.12.2009 | 5% or 10% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) | 10% (Article 12 of the Agreement) |
| Brazil | Convention between the Government of the Russian Federation and the Government of the Federative Republic of Brazil dated November 22, 2004 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 19.01.2009 | 10% or 15% (Article 10 of the Agreement) |
15% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Great Britain | Convention between the Government of the Russian Federation and the Government of the United Kingdom of Great Britain and Northern Ireland dated February 15, 1994 "For the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income and Capital Gains" | 18.04.1997 | 10% (Article 10 of the Agreement) |
0% (Article 11 of the Agreement) | 0% (Article 12 of the Agreement) |
| Hungary | Convention between the Government of the Russian Federation and the Government of the Republic of Hungary dated April 1, 1994 "On the avoidance of double taxation with respect to taxes on income and property" | 03.11.1997 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Venezuela | Convention between the Government of the Russian Federation and the Government of the Bolivarian Republic of Venezuela of December 22, 2003 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 19.01.2009 | 10% or 15% (Article 10 of the Agreement) |
10% or 15% (Article 12 of the Agreement) |
|
| Vietnam | Agreement between the Government of the Russian Federation and the Government of the Socialist Republic of Vietnam dated May 27, 1993 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 21.03.1996 | 10% or 15% (Article 10 of the Agreement) |
10% (Article 11 of the Agreement) | 15% (Article 12 of the Agreement) |
| Germany | Agreement between the Russian Federation and the Federal Republic of Germany dated May 29, 1996 "On the avoidance of double taxation with respect to taxes on income and property" | 30.12.1996 | 5% or 15% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Greece | Convention between the Government of the Russian Federation and the Government of the Hellenic Republic of June 26, 2000 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 13.12.2007 | 5% or 10% (Article 10 of the Agreement) |
7% (Article 12 of the Agreement) |
|
| Denmark | Convention between the Government of the Russian Federation and the Government of the Kingdom of Denmark of February 8, 1996 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 27.04.1997 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Egypt | Agreement between the Government of the Russian Federation and the Government of the Arab Republic of Egypt dated September 23, 1997 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 06.12.2000 | 10% (Article 10 of the Agreement) |
15% (Article 12 of the Agreement) |
|
| Israel | Convention between the Government of the Russian Federation and the Government of the State of Israel dated April 25, 1994 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 07.12.2000 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| India | Agreement between the Government of the Russian Federation and the Government of the Republic of India dated March 25, 1997 "On the avoidance of double taxation with respect to taxes on income" | 11.04.1998 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Indonesia | Agreement between the Government of the Russian Federation and the Government of the Republic of Indonesia dated March 12, 1999 "On the avoidance of double taxation and the prevention of income tax evasion" | 17.12.2002 | 15% (Article 10 of the Agreement) |
15% (Article 12 of the Agreement) |
|
| Iran | Agreement between the Government of the Russian Federation and the Government of the Islamic Republic of Iran dated March 6, 1998 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 05.04.2002 | 5%, 10% (Article 10 of the Agreement) |
5% (Article 12 of the Agreement) |
|
| Ireland | Agreement between the Government of the Russian Federation and the Government of Ireland dated April 29, 1994 "On the avoidance of double taxation with respect to taxes on income" | 07.07.1995 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Iceland | Convention between the Government of the Russian Federation and the Government of the Republic of Iceland of November 26, 1999 "On the avoidance of double taxation and the prevention of tax evasion on income" | 21.07.2003 | 5% or 15% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Italy | Convention between the Government of the Russian Federation and the Government of the Italian Republic of 04/09/1996 "For the avoidance of double taxation with respect to taxes on income and capital and the prevention of tax evasion" | 01.01.1999 | 5% or 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Spain | Convention between the Government of the Russian Federation and the Government of the Kingdom of Spain dated 12/16/1998 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and capital" | 13.06.2000 | 5% or 10% or 15% (Article 10 of the Agreement) |
5% (Article 12 of the Agreement) |
|
| Kazakhstan | Convention between the Government of the Russian Federation and the Government of the Republic of Kazakhstan dated 10/18/1996 "On the elimination of double taxation and the prevention of tax evasion on income and capital" | 29.07.1997 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Canada | Agreement between the Government of the Russian Federation and the Government of Canada dated 05.10.1995 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property" | 05.05.1997 | 10% or 15% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| Qatar | Agreement between the Government of the Russian Federation and the Government of the State of Qatar dated April 20, 1998 "On the avoidance of double taxation with respect to taxes on income" | 05.09.2000 | 5% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Cyprus | Agreement between the Government of the Russian Federation and the Government of the Republic of Cyprus dated 05.12.1998 "On avoidance of double taxation in respect of taxes on income and capital" | 17.08.1999 | 5% or 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Kyrgyzstan | Agreement between the Government of the Russian Federation and the Government of the Kyrgyz Republic dated 01/13/1999 "On the avoidance of double taxation and the prevention of income tax evasion" | 06.09.2000 | 10% (Article 10 of the Agreement) |
10% (Article 12 of the Agreement) |
|
| China | Agreement between the Government of the Russian Federation and the Government of the People's Republic of China dated May 27, 1994 "On the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income" | 10.04.1997 | 10% (Article 9 of the Agreement) |
10% (Article 11 of the Agreement) |
|
| North Korea | Agreement between the Government of the Russian Federation and the Government of the Democratic People's Republic of Korea dated September 26, 1997 "On the avoidance of double taxation with respect to taxes on income and capital" | 30.05.2000 | 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Korea | Convention between the Government of the Russian Federation and the Government of the Republic of Korea dated November 19, 1992 "On the avoidance of double taxation with respect to taxes on income" | 01.01.1996 | 5% or 10% (Article 10 of the Agreement) |
0% (Article 12 of the Agreement) |
|
| Cuba |
Most countries enter into double tax treaties with other countries to facilitate the exchange of information and prevent double taxation of the income of their residents, who may either receive income from another country or be de facto residents of both countries. Most of the agreements are based on the conventions of the Organization economic cooperation and Development (OECD)
UK and Russia
The UK and Russia are no exception, and such an agreement was signed by Douglas Hurd and Andrey Kozyrev in 1994. The agreement is quite complex and consultation should be sought to determine exactly where each source of income will be taxed. Some types of income, such as dividends or interest, may be taxed in both countries. In this case, the tax fully paid in one country is granted a tax relief from the taxable amounts in another country. The agreement between the UK and Russia is generally in line with the OECD convention, as are most such agreements. However, some items have their own characteristics.
This agreement covers the taxation of income received in the UK, capital gains taxes for individuals and corporate tax for companies. At the same time, like many other agreements, it does not deal with inheritance tax at all. The agreement is a legal document and is difficult to summarize, but it covers most of the issues relating to the taxation of a resident of any country who receives income or capital gains in another country.
Examples of income covered by the agreement
Income from employment(salary) is taxed in only one country in which the employee is resident. An exception is the case when an employee, being a resident of one country, performs most of his work duties in another country.
Business profit taxable only in the country in which the business has a permanent establishment. However, if the company is located in the UK and has a permanent establishment in Russia, then Russia may also tax the company's profits, but only in the amount that is received from the activities of the permanent establishment in Russia. The definition of a permanent establishment is given in the agreement.
Dividends paid by a company located in one country to a resident of another country are taxed in both countries. The company or institution paying the dividend withholds tax on the full amount of the payment. In accordance with the OECD convention, these deductions cannot exceed 15%. The recipient of the dividends is then taxed in his country of residence, and the tax already paid in another country is credited to him in the total amount of tax that should be taxed on the full amount of dividends.
Interest is taxed in the same way as dividends, but the maximum amount of tax here is limited to 10%.
capital gain is also a complex topic, and depends on the types of assets to be disposed of, which are listed in the agreement. In general, capital gains in respect of real estate received by a resident of one of the countries will be taxed in the country where the property is located. On the other hand, capital gains on movable property will be taxed in the individual's country of residence (for example, capital gains on shares).
International agreements on the avoidance of double taxation applicable in the territory of the Russian Federation are included in the system of law of the Russian Federation and have priority over the provisions of national tax legislation.
Article 15 of the Constitution of the Russian Federation establishes that international treaties of the Russian Federation are an integral part of its legal system, and if an international treaty establishes rules other than those provided for by law, then the rules of the international treaty shall apply.
Similar rules are established by Article 7 of the Tax Code of the Russian Federation.
For this reason, when taxing foreign persons it is necessary to proceed primarily from the provisions of international treaties in the field of taxation.
The international treaty referred to in Article 7 of the Tax Code of the Russian Federation may have various names in international law: treaty, agreement, convention, and others.
The purpose of concluding an international treaty is to reach an agreement between states or other subjects of international law that establishes their mutual rights and obligations in tax relations in order to avoid double taxation.
Issues of taxation of persons - residents of one state in relation to their income paid in another state, are regulated by the legislation of these two countries. At the same time, any state has the exclusive right to levy taxes on its territory in accordance with national tax legislation, which also applies to foreign organizations.
It is for this reason that double taxation of foreign organizations arises when a person - a resident of one country receives income from sources located in another country, owns property (usually immovable) in another country or carries out activities that result in income or other income in another country. country. For these situations, it is typical that the same person is considered by the tax legislation as a taxpayer or the same object is considered as an object of taxation simultaneously in two or more countries.
For example, income received by a foreign organization from sources in the Russian Federation is subject to taxation in the Russian Federation in accordance with the provisions of the RF Tax Code. At the same time, these incomes received on the territory of the Russian Federation are also subject to taxation in accordance with the legislation of the foreign state of the recipient of income. Accordingly, the tax in this case is paid twice: for the first time - in accordance with the norms of the tax legislation of the state - the source of income, the second - in accordance with the norms of the internal legislation of the state - the recipient of income.
The provisions of an international treaty determine the rules for delimiting the rights of each of the states to tax organizations of one state that have an object of taxation in another state.
In addition, amounts of tax paid in the source State in accordance with the domestic tax laws of that State may be credited against the payment of tax by a foreign entity abroad. The procedure for offsetting taxes paid abroad is regulated by the tax legislation of a foreign state. In Russia, a similar procedure is applied, provided for in Articles 232, 311 of the Tax Code of the Russian Federation.
As a general rule, the amount of creditable taxes paid in the source state cannot exceed the amount of tax payable by this organization abroad on the relevant income, calculated in accordance with the tax laws and regulations of the foreign state. The offset is made subject to the presentation by the taxpayer of a document confirming the withholding of tax in the state - the source of income.
It should be borne in mind that the current international tax agreements (on the avoidance of double taxation) determine only the rules for delimiting the rights of each of the states to tax organizations of one state that have an object of taxation in another state, however, the methods for implementing these provisions: the procedure for calculating, paying taxes, collecting tax amounts , not paid within the established time limits, and bringing to responsibility for violations committed by the taxpayer - establish domestic norms of tax law.
In addition to eliminating double taxation, international agreements aim to develop mechanisms to prevent tax evasion and reduce the possibility of abuse of the rules of agreements in order to avoid tax through the exchange of information between the competent authorities of the respective states.
Double taxation avoidance agreements (treaties, conventions) – multilateral and bilateral agreements, establishing the rules in accordance with which the avoidance of double taxation is achieved:
1) income received by individuals and legal entities;
2) property and income from the sale of property;
3) income and property in the field of international transportation;
Accordingly, double taxation in international economic relations may arise in relation to the following taxes:
1) personal income tax;
2) corporate income tax;
3) (both individuals and legal entities, and other laws).
Double tax treaties generally contain:
1) listing the types of taxes regulated by the agreement (article "Taxes covered by the agreement");
2) determination of the circle of persons to whom the agreement applies;
3) determining and establishing the conditions of taxation (taxation restrictions) in the state - the source of income of such types of income as:
Profits from commercial activities;
Dividends;
Interest;
Income from dependent personal activities (income from employment);
Income from independent personal activities (compensations and fees);
other income;
4) determination of ways to avoid double taxation (tax exemption or application of a foreign tax credit);
5) establishment of the procedure for the implementation of the agreement by the parties (entry into force, duration, procedure for terminating the agreement, application of mutual agreement procedures).
Separate provisions of these Agreements differ from each other, since the Agreements are bilateral in nature and are concluded based on the nature of relations between Russia and a particular country. However, many agreements are based on the Organization for Economic Co-operation and Development (OECD) Model Convention on Taxes on Income and Capital and contain similar provisions.
In this regard, it is possible to generalize the principles of income taxation in accordance with international agreements.
For the purpose of applying double tax treaties concluded by the Russian Federation ( former USSR), revenues are subdivided:
1) on income (profit) from commercial activities;
2) for special types of income for which special taxation regimes, exemption from taxation, tax credits are provided.
Profits from commercial activities in the context of double tax treaties are incomes of foreign organizations operating through a permanent establishment in the Russian Federation.
For this type of income, the norms of agreements on the avoidance of double taxation, as well as the norms of the national tax legislation of a number of countries, establish the main taxation regime and standard forms for the elimination of double taxation.
TO os Common types of income for which special taxation regimes and tax exemptions are provided include:
a) income from international transportation, dividends, interest;
b) income from real estate, from the sale of real and movable property, from copyrights and licenses (intellectual property);
c) income from employment;
d) income from independent personal activities ( professional services), fees of directors of enterprises, remuneration or other income from public service, pensions;
e) income of artists and athletes, teachers, scientists, students and trainees;
e) other income.
Differences in approaches to taxation of income from certain types of activities are determined by the specifics of these incomes, the conditions and nature of the activity, as well as characteristic features activities of certain categories of subjects of taxation.
The article of agreements “Profit from commercial activities” affects all types of income, with the exception of those types, the taxation procedure for which is determined in special articles.
The corresponding article of the agreement determines in which state this or that income or this or that part of it will be taxed. The very order of the taxation procedure, conditions and mandatory requirements are always established in accordance with the national legislation of the state that carries out taxation.
In the article of the agreement “Profit from commercial activities”, the parties that entered into the agreement consider profit as an object of taxation, that is, the difference between income received and expenses incurred to extract these incomes, and in articles related to special types of activities, we are talking about income.
Subject to agreement, profits from commercial activities derived in one contracting state by a person with a permanent residence in the other contracting state may be taxed in the first state only if it is received through its permanent establishment located there (permanent establishment of a foreign organization) and only to the extent , which can be attributed to the activities of this permanent establishment. In this approach, the principle of territoriality finds its application, according to which only profits received from sources located in the territory of this state are taxed on the territory of one state. The application of this principle of international agreements is usually specified as follows: “If a person with a permanent residence in one contracting state carries on commercial or other economic activities in another contracting state through a permanent establishment located there, then in each contracting state such permanent establishment shall include the profits that it could receive if it were a separate and independent person, carrying out the same or similar activities under the same or similar conditions and acting completely independently. Thus, on the one hand, those types of profit that a person receives from sources in a given country, regardless of the activities of the specified representative office, do not belong to the profit of the representative office, and on the other hand, a possible underestimation of the amount of profit received by the person from the activities of his permanent representative office is prevented.
Typically, agreements general characteristics the procedure for calculating the profit of a permanent establishment and indicate those types of expenses that are allowed to be deducted from taxable income to determine the object of taxation - profit received through a permanent establishment. This is stated in the model Agreement as follows: “In determining the profits of a permanent establishment, a deduction may be made for expenses incurred for the purposes of the activities of this permanent establishment. However, a reasonable redistribution of documented expenses between a resident of a Contracting State and his permanent establishment in the other Contracting State is permitted. Such expenses shall include management and general administrative expenses, research and development expenses, interest and fees for management, advice and technical assistance, whether incurred in the State in which the permanent establishment is situated or elsewhere.”
The profit attributable to a permanent establishment must be determined annually by the same method, unless there is good and sufficient reason to change it.
If the profit includes types of income that are specifically mentioned in other articles of the agreement, then the provisions of these articles are not affected by the provisions of the article "Profits from commercial activities".
The Russian Federation has concluded double taxation avoidance agreements with many states.
More than 70 international agreements (conventions, treaties) are currently in force. Along with the agreements concluded by the Government of the Russian Federation, the agreements concluded by the Government of the USSR continue to operate.
The current international agreements of Russia on the avoidance of double taxation of income and property differ significantly on a number of issues, including specific concepts and terms that are often used in individual agreements.
In addition to general international agreements on the elimination of double taxation, there are a number of special bilateral agreements, mainly on the elimination of double taxation in the field of international (sea and air) transportation, concluded by the government of the USSR. Such agreements have been concluded with the People's Democratic Republic of Algeria (dated 11.06.88), the Argentine Republic (dated 30.03.1979), the Hellenic Republic (dated 27.01.76), the Republic of Iraq (dated 26.09.74), Ireland (dated 12/17/1986), the French Republic (dated 03/04/70).
Russia is a member of the Geneva Diplomatic and Consular Conventions, as well as the multilateral Convention for the Avoidance of Double Taxation of Royalties (Madrid, December 13, 1979).
In relations with individual countries in the 1990s, agreements between the countries of the Council for Mutual Economic Assistance continued to operate on the elimination of double taxation of income and property of individuals (concluded on May 27, 1977 in relation to Mongolia, Slovakia and the Czech Republic), as well as on the elimination of double taxation of income and property of legal entities (signed on May 19, 1978; continued to be valid for the same countries).
An independent group consists of bilateral agreements on the avoidance of double taxation of income and property of the Russian Federation with the CIS member countries: Agreement with the Republic of Azerbaijan (dated 03.07.97), Agreement with the Republic of Belarus (dated 21.04.95), Agreement with the Republic of Uzbekistan (dated March 2, 1994; ratified on April 24, 1995), with Ukraine (dated February 8, 1995).
For more information on issues related to accounting and tax accounting in foreign organizations on the territory of the Russian Federation, you can find in the book of CJSC "BKR Intercom-Audit" " Foreign organizations and their representations.
