Russia COVID-19: Higher tax on dividends and interest

In the address to the nation, Russian President Vladimir Putin has announced yesterday, 25th March 2020, new measures to be implemented in the wake of the coronavirus pandemic.

Amongst other socio-economic measures, Putin stated that all revenue distributions (e.g. interest or dividends) going from Russia to offshore jurisdictions should be taxed with an adequate tax rate. At the moment, two thirds of these funds are subject to a tax rate of only 2% – these funds represent the income of specific individuals earned from various optimization schemes, while other taxpayers – including blue collar workforce, must adhere to an income tax rate of 13%.

To tackle this issue, Putin is proposing to tax the individuals withdrawing income on dividends and interest to foreign accounts at an increased rate of 15% and has requested from the government to start preparing relevant adjustments to Russian Double Tax Treaties with certain countries. The review of the Double Tax Treaties will commence with countries at the receiving end of the significant capital outflow from Russia. In case where the proposal for adjustments is not accepted by the relevant countries, Putin stated that Russia will unilaterally withdraw from the existing agreements.

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