Developments in Judicial Interpretation of the Recent Law Expanding Russian Courts’ Exclusive Jurisdiction to Disputes Related to Sanctions Against Russians

Six years after the introduction of sanctions against Russia by the United States and the European Union, the new sanctions-related amendments to...

International Asset Recovery Services

WHO WE ARE:  Marks & Sokolov is a boutique litigation law firm with offices in the United States and Russia, that for over twenty years has...

The law on out-of-court bankruptcy of citizens went into effect

February 2, 2021 By: Grigory Galkin The amendments[1] to the Bankruptcy Law entered into force on September 1, 2020, allowing the out-of-court...

1782 Discovery Blog: International Divorce Finding Hidden Assets Of The Suddenly Asset Poor Billionaire

International high net worth and celebrity divorces often involve disputes over location and control of real property, art, company ownership and...

1782 Discovery Blog: U.S. Courts Remain Spilt On Allowing 28 U.S.C. §1782 Discovery For Private International Arbitration

The U.S. allows parties to non-U.S. litigation proceedings to obtain documents and witness testimony from sources within the U.S., even if such...

Bruce Marks gives interview on channel Russia-24 on the upcoming elections

October 27, 2020 Voice of America. Bruce Marks comments on the upcoming elections. A slim majority of Americans, 52%, approve of the way Trump is...

Changes in the Application of Double Taxation Agreements by the Russian Federation

by | Jul 9, 2020 | Blog

Expected new rules pertaining to taxation at source under Russian bilateral tax treaties could apply as early as January 2021.  There is no information yet as to whether either Russia or the US extended any proposals to each other to amend the existing tax treaty.  Neither country is known as a tax haven for foreign dividend income.  However, if either side exits the existing tax treaty, the taxpayers will carry the burden.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”) implemented a series of tax treaty measures to lessen the opportunity for tax avoidance by multinational enterprises.  The MLI sets forth agreed upon minimum standards to counter treaty abuse and offers concrete solutions for governments to close the gaps in existing international tax rules and to modify the application of bilateral tax treaties.[1]

The MLI came into force on July 1, 2018 and already covers 94 jurisdictions.

On April 30, 2020, Russia sent the Organization of Economic Co-operation and Development (OECD) a notice of completion of internal procedures necessary for the entry into force of the MLI in respect to bilateral tax treaties with 27 jurisdictions.[2] The list includes jurisdictions which previously received a proposal from Russia to amend the current tax treaties and to increase withholding tax rate at source. Specifically, on April 13, 2020, the Russian Ministry of Finance announced that it had already approached the relevant authorities of Cyprus, Luxembourg and Malta with a proposal to set a 15% standard tax rate at source for dividends and interest income.[3] The proposals were extended in furtherance of President Putin’s request to the government to implement measures ensuring the adequate taxation of Russian-sourced dividend and interest payments that are channeled to “offshore” jurisdictions by taking advantage of loopholes in Russia’s tax treaties as part of the government’s response to the situation caused by the global pandemic.[4]

Amendments to a tax treaty require an amending protocol to be signed and ratified by both parties. Unilateral termination of a tax treaty requires a termination notice and termination is always an option under treaty provisions. There is possibility that the tax treaties with Cyprus, Luxembourg and Malta will be either amended or terminated by January 1, 2021.

Maria Grechishkina is a senior attorney in the Philadelphia office of Marks & Sokolov LLC. With over 20 years of professional experience, Ms. Grechishkina has represented Western, Russian and Ukrainian clients in complex commercial disputes, corporate and transactional matters and has provided legal opinions on Russian law to US Courts.

United States:
Marks & Sokolov, LLC
1835 Market Street, 17th Fl.
Philadelphia, PA,19103
Phone: (215) 569-8901

OOO Marks & Sokolov
21/5 Kuznetsky Most, Entrance 1, Suite 612
Moscow, 107996, Russia
Tel: +7 (495) 626-0606