On August 8, 2023, the “long-awaited” Presidential Decree No.585 was published (in Russian), suspending  a number of double tax treaties. The Ministry of Finance and the Ministry of Foreign Affairs announced plans to suspend double tax treaties back in March.

The decree suspends certain provisions of double tax treaties with 38 states, including EU countries, Switzerland, United Kingdom, USA, Singapore, Albania and other “unfriendly” states. In June, states were also included in Russia’s list of offshore.

The Decree affects key provisions of double tax treaties that establish preferential tax rates for specific types of income. This means that when payments are made from Russia to residents of such countries or to residents of “friendly” states, if the end recipient is from an “unfriendly” state, Russia being the source of payment will apply standard income tax rates, i.e. 20% on interest and royalty and 15% on dividends.

At the same time, some provisions of double tax treaties remain in effect, in particular, the article on avoidance of double taxation, which will potentially allow to set off the tax paid in an “unfriendly” state against the Russian tax, and vice versa. However, it is still unclear how other countries will react and how the surviving provisions will apply in practice. 

Although the double tax treaties are suspended starting from the date of the Decree, there also needs to be a federal law to this effect.

We will continue to monitor the situation and will keep you posted.