German companies hold the largest remaining Western presence in Russia, now operating post-suspension at 15/20% WHT. What your group pays, whether to keep operating, hold or exit, and how to move profit without losing it to withholding, are the questions.
15% on dividends and 20% on interest and royalties out of Russia, with no relief — the suspension's direct cost to a German group.
Stay and optimise, hold, or exit — costed on your numbers so the board decides with the full picture.
Germany is Russia's largest Western trading partner still maintaining a meaningful corporate presence in the country — the RAFP register shows over 60 active German-founded entities in 2026. All of them operate under a fundamentally changed legal and tax framework since the 2022 suspension of the Russia-Germany double tax treaty. This guide covers what that means in practice and what options German companies have.
Russia suspended most provisions of its double tax treaties with "unfriendly" jurisdictions by Presidential Decree No. 585 in August 2023. For Germany, the suspension removed the treaty-reduced withholding tax rates and replaced them with the domestic Russian rates. The treaty text remains in force as a legal instrument — it has not been revoked — but its practical benefits are suspended until further notice:
The effective tax rate on dividends distributed from a German-owned Russian subsidiary has increased from as low as 5% to 15% (plus the Russian CIT of 25% on the underlying profit). For companies with significant Russian earnings, this is a material cost increase that affects the business case for maintaining Russian operations.
Even at the 15% rate, paying dividends to a German parent faces a second practical barrier: the Type C account system. Since March 2022, dividends paid to residents of "unfriendly" countries are credited to a special ruble-denominated account (Type C, счёт типа «С») at the Russian bank — blocked from free disposal by the foreign recipient. The funds accumulate in Russia and cannot be transferred abroad without approval from the Government Commission for Currency Control.
In practice, this means German parent companies are accruing a growing ruble balance in Russia that they cannot access. Workarounds that companies have explored include:
Using accumulated balances for ruble-denominated reinvestment in Russia (capex, inventory, expanded headcount);
Applying to the Government Commission for individual approval to transfer funds — some approvals have been granted on a case-by-case basis, typically for specific business reasons;
Restructuring ownership through an intermediate friendly-jurisdiction entity (UAE, Turkey, Serbia) before dividend declaration — requires careful structuring and advance planning, see our guide to intragroup transfers.
Dividends already declared in favour of a German parent remain credited to the German parent's Type C account regardless of any subsequent ownership restructuring. Only dividends declared after a restructuring to a friendly-jurisdiction entity would flow through the new ownership structure. Timing of dividend declarations relative to any restructuring is therefore important.
German nationals working in Russia as secondees or hired locally face a changed tax position from both sides:
Pick your situation — we'll tell you where you stand:
The 183-day treaty exemption is suspended: under the Russia-Germany treaty, a German employee working in Russia for fewer than 183 days in a 12-month period and paid by a non-Russian employer could avoid Russian NDFL. This exemption depends on the treaty and is now unavailable. Russian domestic rules apply — a German employee physically working in Russia is subject to Russian NDFL from day one if the work is performed in Russia, regardless of where the salary is paid.
NDFL rate: 30% as a non-resident until 183 days in Russia are reached (when the 13–22% progressive scale kicks in). HQS status can mitigate this — see our HQS guide.
German income tax: Germany taxes its residents on worldwide income. A German national remaining a German tax resident while working in Russia may face parallel tax obligations in both countries — with limited treaty relief now available.
Social contributions in Germany: German social security (Sozialversicherung) arrangements for seconded employees in Russia also require review — coordination between the employer's German and Russian HR functions is essential.
German companies that have decided to maintain their Russian operations are operating within a compliance framework that requires active management:
Sanctions compliance: German parent companies are subject to EU sanctions regulations, which restrict certain categories of transactions with Russia. Compliance with both German/EU law and Russian law simultaneously requires legal advice from both jurisdictions. Russian "counter-sanctions" legislation also creates mirror obligations.
Transfer pricing: related-party transactions between the German parent and the Russian subsidiary remain subject to Russian transfer pricing rules — arm's length documentation is required for all intercompany flows, now including service fees (formerly potentially exempt under treaty).
Reporting to German parent: IFRS consolidation of the Russian subsidiary continues to require accurate Russian RAS financials and reconciliation — see our IFRS-RAS reconciliation guide. Currency translation of ruble results at a heavily moved exchange rate requires careful disclosure treatment.
Corporate governance: German supervisory boards (Aufsichtsräte) and management boards increasingly require structured quarterly reporting on the Russian subsidiary's operations, regulatory exposure and contingent liabilities. TaxWell assists German parent finance teams with preparing these reports in a format suited to German governance requirements.
For German companies that have decided to exit, the framework is the same as for other unfriendly-jurisdiction companies, with some specific practical points:
Sale of a Russian subsidiary by a German parent requires Sub-Commission approval, a mandatory 60% discount to market value and payment of a 35% "voluntary contribution" (exit tax) on top — effectively recovering around 26% of fair value.
The ruble proceeds of any approved sale are paid into a Type C account — repatriation of even those proceeds requires a separate approval.
Liquidation (winding down rather than sale) avoids the Sub-Commission and exit tax but requires a 12–15 month process including creditor notification, tax audit and EGRN deregistration. See our liquidation guide.
Transferring ownership to a "friendly" jurisdiction intermediary before any sale or dividend changes the applicable framework — this is one of the most commonly used approaches but carries its own regulatory conditions. See our comprehensive exit guide.
Recalculate the effective tax cost on Russian profit extraction — 25% CIT + 15% dividend WHT (no treaty benefit) is now the baseline
Audit accumulated Type C account balances and model scenarios for their eventual use or release
15% on dividends and 20% on interest and royalties out of Russia, with no treaty relief. Where you paid 5% on dividends before, it's now 15% — a real annual cost that shapes both operating and repatriation decisions.
Reassess the financing — 20% interest WHT, plus thin-cap rules that can reclassify excess interest as a dividend, may make equity cheaper than debt now. Modelling the structure against the current rates is what shows the better path.
It turns on the numbers — the cost of continuing against the cost and recovery of an exit. Costing both, for a German group specifically, is what lets the board decide on facts rather than headlines.
This covers the German position — the largest remaining Western presence, now operating post-suspension at 15/20% WHT. Your question is what your group pays, whether to keep operating, hold or exit, and how to move profit without losing it to withholding.
A German board reassessing Russia? The financial picture is worth completing before the decision.
Practical support for international business in Russia.