Russia: Changes to the Tax Code
Following our Announcement A14124 dated 29 September 2014 and effective
1 January 2015
the following new tax rates will apply on dividends paid for Russian shares:
- 13% for beneficial owners that are Russian residents (both legal entities and individuals); and
- 15% for undisclosed beneficial owners that are not residents of the Russian Federation.
Background
The Federal Law 366-FZ dated 24 November 2014 on “changes to part two of the Tax Code of the Russian Federation and other federal laws of the Russian Federation” and Federal Law 376-FZ dated 24 November 2014 on “changes to the Tax Code of the Russian Federation” have been published. The laws introduce, among other things, the following changes that are effective as of 1 January 2015:
- The tax rate applicable to dividends on shares in Russian companies (including depositary receipts on shares in Russian companies) will increase from 9% to 13% for Russian tax residents, for both legal entities and individuals.
- The 30% tax rate will no longer apply to dividends on shares in Russian companies (including depositary receipts on shares in Russian companies) payable to non-Russian entities acting on behalf of third parties. Since 2014, the 30% tax rate has been applicable by Russian securities depositories acting as withholding agents, in the event of non-disclosure of the actual recipient of income on securities (beneficial owner or beneficiary). As of 1 January 2015, with respect to non-disclosed securities, withholding agents will apply the standard tax rate of 15% applicable to Russian non-residents.
Impact on Customers
For dividends paid as of 1 January 2015 and after submission of the required information within the prescribed deadlines, the following reduced tax rates will be available:
- Double Taxation Treaty (DTT) rates: if the final beneficial owner is a resident of a country that has signed a DTT with Russia that grants a treaty rate lower than 15% and complies with tax beneficial ownership and Certificate of Tax Residence (COTR) requirements set by the Russian Tax Code. The COTR will not be requested before distribution of income entitlements but should be in place and available at any time upon request.
- 15%: if the final beneficial owner:
- is not resident in a DTT country; or
- is not eligible to obtain the DTT; or
- remains undisclosed. (based on the current interpretation obtained from the market, for undisclosed positions no split must be done between legal entities and individuals).
- 13%: if the final beneficial owner is a Russian tax resident.
The penalty tax rate of 30% will no longer be applicable for undisclosed positions.
To apply for reduced tax rates, the details of the relief at source and quick refund procedures, as well as the information regarding the possibility to be audited by the Russian Tax Authorities, remain, until further notice, applicable as described in our announcements A14098 dated 4 July 2014 and A14027 dated 25 February 2014.
We continue to monitor the market and will inform customers as soon as further information becomes available.
Further Information
For further information, customers may contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or their Relationship Officer.