The domestic withholding rates on payments to foreign companies, how double tax treaties reduce them, what documentation relief requires, and the effect of treaty suspensions.
When a Russian company pays dividends, interest or royalties to a foreign company, it generally withholds tax at source. How much depends on the domestic rate and whether a double tax treaty reduces it — and, increasingly, on whether that treaty is still fully in force. This guide explains the landscape.
Absent treaty relief, the domestic withholding rates are broadly 15% on dividends and 20% on interest and royalties. These are the default rates the paying company must withhold and remit unless a lower treaty rate applies and is properly documented.
Dividends: 15% domestic
Interest: 20% domestic
Royalties: 20% domestic
Russia's double tax treaties can reduce these rates substantially — dividends often to 5–10%, interest and royalties sometimes to zero — where the recipient qualifies. Relief is not automatic: it depends on the specific treaty and on meeting its conditions.
To apply a reduced treaty rate, the paying company generally needs confirmation of the recipient's tax residency and its beneficial ownership of the income. Beneficial-ownership substance has become a focus of scrutiny, so the documentation must be real, not formal. We prepare and hold what is needed before payment.
A number of treaties with "unfriendly" jurisdictions have been partially suspended, which can push withholding back to domestic rates on affected flows. The status must be checked per jurisdiction and per payment type before funds move — what worked last year may not apply now.
Before any cross-border payment, we model the domestic rate against the applicable treaty position, confirm the documentation, and — where a treaty is suspended — quantify the domestic-rate cost so there are no surprises. The wrong assumption here is expensive and hard to reverse once tax is withheld.
The domestic rate is 15%. An active double tax treaty can reduce it to 5–10% where the recipient qualifies and beneficial-ownership and residency documentation is in place.
Confirmation of the recipient’s tax residency and beneficial ownership of the income. Beneficial-ownership substance is scrutinised, so documentation must reflect real substance, prepared before payment.
Several treaties with "unfriendly" jurisdictions are partially suspended, which can return withholding to domestic rates on affected flows. Status should be checked per jurisdiction and payment type before moving funds.
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