Russian Federation and the Grand Duchy of Luxembourg have changed the double taxation rules

Recently Russian Federation and the Grand Duchy of Luxembourg have signed a protocol regarding the amendments in the double taxation rules. This Protocol was negotiated following a request from the Russian Federation due to a change in its conventional policy regarding withholding taxes on dividends and interest.

The two states primarily focused on avoiding double taxation between the two countries. The minimum withholding tax rate on dividends under the Russia–Luxembourg DTTs could be raised from 5% to 15%. The minimum withholding tax rate on interest under the same treaty may be increased from 0% to 15%.

The two countries already signed the document on the 6th of November 2020. On behalf of the Russian Federation, the signee was the State Secretary and Deputy Minister of the Ministry of Finance, Alexei Sazanov. On behalf of the Luxembourg State, the signee was Mr. Georges Faber, the Ambassador of the Grand Duchy of Luxembourg in the Russian Federation. The ratification of the protocol is supposed to be finished respectively at the end of the year, so the provision of the document mentioned above will enter into force until the 1st January 2021.

An analogical document was signed earlier between Russia and Malta to amend the agreement on avoiding double taxation to increase the tax to 15% at the income source in dividends and interest. The Russian Ministry of Finance also mentioned that negotiations on amendments to the tax agreement with the Netherlands are ongoing.

The importance of the protocol is that it will define the exceptions on which income in the form of dividends and interests can be used at a preferential rate of 5%. It is mostly foreseen for institutional investments and public companies with at least 15% of whose shares are in free float. These companies may also be holding at least 15% of the company's capital. It's important to note that none of these changes will affect interest income paid on Eurobonds, bond issues of Russian companies, and loans from foreign banks.

Also, Mr. Sazanov pointed out the importance of concentrating financial resources in the country to implement measures that support its population and economy in the current situation of the COVID-19 pandemic. Luxembourg is the right place with its stable banking system and sustainable economy. This kind of negotiation strengthens the two countries' economic relations.

Sources and Articles

https://home.kpmg/lu/en/home/insights/2020/05/russia-to-amend-tax-treaty...
https://moscou.mae.lu/en/News/Signature-of-the-Protocol-amending-the-Agr...
https://iz.ru/1083578/2020-11-06/rossiia-i-liuksemburg-podpisali-protoko...
https://tass.ru/ekonomika/9930685/amp

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