08/02/22

INTERNATIONAL TAX: Russia sees no grounds to negotiate new tax treaty with Netherlands, says Finance Ministry.

As published on tass.com, Tuesday 8 February, 2022.

Russia's Finance Ministry sees no grounds to start talks with the Netherlands on the new tax treaty because the new draft it received from the Dutch colleagues still contains the terms Russia had not agreed with earlier, a spokesperson with the ministry told TASS on Tuesday.

"To date, the agreement with the Netherlands has ceased to be in effect. At the end of last year, our Dutch colleagues sent their proposal regarding the new version of the agreement, which in fact repeats the terms we had not agreed with when deciding to withdraw from the agreement. Accordingly, now there are no grounds to start talks; we do not see any prospects for making quick progress on this issue," the official said.

The agreement between the governments of Russia and the Netherlands on the avoidance of double taxation and the prevention of tax evasion with regard to income and property taxes ceased to be effective since January 1.

In March 2020, Russian President Vladimir Putin ordered the imposition of a 15% tax on income in the form of dividends and interest transferred to accounts overseas. This required the revision of tax agreements with other countries. Those agreements provided for the withdrawal of profits from Russia, paying tax at an effective rate of 2-3%. In case the parties fail to agree on amendments to those agreements, these documents were to be terminated.

Due to the fact that significant income payments of Russian origin are made through the Dutch jurisdiction, the Russian Finance Ministry held negotiations with the Dutch Finance Ministry to amend the tax agreement. The Russian side came up with conditions similar to those it had proposed to the Republic of Cyprus, the Grand Duchy of Luxembourg, and Malta. Eventually, Russia managed to agree on new tax treaties with those three states.

The Netherlands did not agree with Russia's proposal, insisting on expanding the list of incomes taxed at reduced rates.