NETHERLANDS: Russia rules to denounce double tax treaty.

As published on tass.com, Monday 12 April, 2021.

MOSCOW, April 12. /TASS/. The Russian government has approved the proposal to denounce the double tax agreement with the Netherlands. The decree to that effect has been posted on the website of the government’s official legal information on Monday.

"[The government rules] to approve the proposal to denounce the agreement between the government of the Russian Federation and the government of the Kingdom of the Netherlands on avoidance of double taxation with respect to income and property taxes, signed in Moscow on December 16, 1996," the document says.

Earlier, press officer of the Dutch Finance Ministry Remco Raus told TASS that the Dutch government was still in talks with the Russian authorities on the revision of the agreement on avoiding double taxation. Raus said this when he was asked to comment on the statement made by Prime Minister Mikhail Mishustin who said that Moscow had taken a tough stance on this issue and did not rule out any options up to denunciation.

In late January, Russia’s Deputy Finance Minister Alexei Sazanov said that the bill on denunciation of the agreement on avoidance of double taxation with the Netherlands could be submitted to the State Duma, lowe house of parliament in February 2021.

Earlier, Russian Finance Minister Anton Siluanov said that Russia "will not back down" on the issue of denouncing the agreement on the avoidance of double taxation with the Netherlands.

In December, Russian Finance Ministry announced that it was working on a bill to denounce the agreement on the avoidance of double taxation with the Netherlands. Prior to this, the Finance Ministry held several rounds of negotiations with the Dutch Finance Ministry and proposed conditions similar to those already agreed with Cyprus, Luxembourg and Malta, but the negotiations were unsuccessful.

In turn, the approach to changing the agreement proposed by the Netherlands was not supported by the Russian side, since it implied that separate channels for the withdrawal of funds from the country would be preserved, the Finance Ministry noted.

Current taxation agreement

The current agreement between Russia and the Netherlands makes it possible to withdraw revenues abroad from Russia under the effective rate of 2-3%, whereas the relevant rate in Russia is much higher - for example for legal entities its 15% on dividends and 20% on interest.

In late March 2020, President Vladimir Putin instructed the government to impose a 15% tax on revenues in the form of dividends and interest, which are transferred from Russia to accounts abroad. This requires adjusting taxation agreements with other countries to avoid double taxation. The President warned that terminate double taxation agreements unilaterally if it fails to find understanding with partners.

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