Korean and Japanese companies in Russia are usually described in one word — leaving. The reality is three situations at once: winding down, holding frozen, or quietly staying. Which is yours decides everything, and the suspended treaty raises the cost of all three.
A clean wind-down means settling tax and reporting, handling asset disposal and — where required — government-commission approval, with the suspended treaty taxing flows out without relief.
A dormant entity still files and stays compliant; a continuing operation faces 25% CIT and 15% dividend WHT. Each path has a different cost to model.
Korea and Japan between them account for some of the most significant foreign corporate presences that Russia has seen in the past two decades — automotive manufacturing (Hyundai, Kia, Toyota), electronics (Samsung, LG, Sony), trading houses (Sumitomo, Mitsui, Marubeni) and industrial equipment suppliers. Since 2022, both countries have faced the same fundamental challenge: their double tax treaties with Russia are suspended, their companies are under domestic regulatory pressure to reduce Russian exposure, and yet the legal and operational reality of winding down — or maintaining — a substantial Russian operation is complex. This guide covers the 2026 framework for Korean and Japanese companies.
Both the Russia-Korea and Russia-Japan double tax treaties were suspended under Presidential Decree No. 585 in August 2023. Domestic Russian rates now apply to all cross-border payments:
For Korean companies that previously benefited from the 5% rate on dividends (applicable where the Korean parent held ≥25% of the Russian entity for a minimum period), the effective rate increase is from 5% to 15% — a tripling of the withholding tax. For Japanese companies, from 10% or 15% to a flat 15%. In both cases, dividends also flow into Type C blocked accounts (see below).
Exiting, holding dormant, or continuing to operate each carry a different number — a mandatory discount and exit tax on one side, 25% CIT and 15% dividend WHT on the other, and ongoing filings even for a dormant entity. We model your specific path so the board decides on figures, not headlines.
Dividends paid by a Russian entity to a resident of an "unfriendly" country — which includes both Korea and Japan — must be credited to a Type C ruble account (счёт типа «С») in Russia. These funds cannot be freely transferred abroad. For Korean and Japanese parent companies, this means:
Russian profits are effectively trapped in rubles in Russia;
The accumulated balance grows with each profitable year the subsidiary operates;
Release requires approval from the Russian Government Commission for Currency Control — approvals are granted case by case and are not routine;
Reinvestment of trapped rubles into Russian operations (equipment, inventory, local acquisitions) is one of the few accessible uses.
Korean and Japanese automotive manufacturers face a more complex situation than pure trading subsidiaries, because they left physical production assets in Russia:
Pick your situation — we'll tell you the plan:
Hyundai/Kia: the St. Petersburg plant was transferred to AVTOVAZ in 2023 under negotiated terms. The legal entities remain partially active for warranty, parts supply and winding-down activities.
Toyota: the St. Petersburg plant was also transferred, with Toyota retaining certain contractual rights. Management of residual liabilities, warranty claims and employee obligations continues.
Manufacturing asset transfers in Russia require Government Commission approval where the seller is from an unfriendly jurisdiction, and are subject to the 60% mandatory discount and 35% exit tax framework — making them expensive to formalise. Some transfers have been structured as long-term leases or management agreements to avoid triggering the full exit framework.
Major Japanese trading houses (総合商社) — Sumitomo, Mitsui, Marubeni, Itochu, Mitsubishi — historically maintained Russian subsidiaries and representative offices for commodity trade, energy and industrial goods. The post-2022 environment has created specific challenges for this model:
Japanese government guidance has encouraged reduction of Russian commodity exposure, particularly energy and resources;
SWIFT disconnection of major Russian banks means traditional payment corridors are broken — yuan, ruble or alternative channels are required;
Representative offices (which cannot conduct commercial activity) have been retained by some trading houses as monitoring presences;
Staff who were Japan-based on secondment have largely returned; locally hired Russian staff remain, creating ongoing employment and payroll obligations.
NDFL under domestic rules: like other unfriendly-country nationals, Korean and Japanese employees working in Russia can no longer rely on treaty exemptions for short assignments. Russian NDFL applies from the start of work in Russia. Non-residents pay 30%; HQS status provides the progressive scale from day one for qualifying senior executives — see our HQS guide.
Korean and Japanese personal tax obligations: Korean tax residents are taxed on worldwide income; Japanese tax residents similarly. Cross-border personal tax advice in the home country is needed for any employee working in Russia who remains a Korean or Japanese tax resident.
Return of seconded staff: many Korean and Japanese companies have already repatriated their seconded executives. Locally hired Russian management has taken over day-to-day operations, sometimes under a management agreement with the foreign parent or through a professional interim director arrangement — see our business representation guide.
Korean and Japanese companies still holding Russian entities face a three-way decision that has not gotten simpler over time:
Stay and operate: viable where the Russian subsidiary is profitable in ruble terms, has a local management team, and the parent company can absorb the dividend blockage. Requires robust compliance infrastructure and regular reporting to parent governance bodies.
Restructure through a friendly jurisdiction: transferring ownership to a UAE, Turkish or Kazakh holding entity changes the applicable WHT rates (treaty-reduced in some cases) and removes the Type C account restriction on future dividends. The transfer itself requires Government Commission approval and compliance with the exit framework if from an unfriendly jurisdiction. Timing and structure are critical — see our intragroup transfer guide.
Exit (sale or liquidation): sale to a Russian buyer requires Sub-Commission approval, 60% discount to market value and a 35% exit contribution. Liquidation takes 12–15 months but avoids the sale price discount. Both options leave accumulated Type C dividends in Russia. See our comprehensive exit guide.
Recalculate the true cost of Russian operations including 15% dividend WHT and Type C account blockage — model when accumulated rubles become a material balance sheet issue
Yes. A dormant company still files statutory accounts and tax returns and stays on the register — dormancy isn't absence of obligation, and unfiled years accumulate penalties that surface at exit or reactivation. Keeping a held structure compliant and cheap is what keeps it ready to either exit or restart.
Settling tax and reporting to the exit date, handling asset disposal, and — where the buyer or structure requires it — government-commission approval. The suspended treaty means flows out are taxed without relief, so the exit's structure and sequence affect what you actually recover.
For some sectors, yes — a thinner competitive field is a real advantage. The tax picture differs from before 2022 (25% CIT, suspended treaty, banking friction), but none of it is prohibitive with the right structure. It's worth modelling honestly, downside included.
This covers the suspended treaties and restructuring options. The reality is three situations at once — winding down, holding a frozen structure, or quietly staying — and the suspended treaty at 15–20% changed the maths for all three.
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