Russia and Luxembourg signed the Protocol to the Agreement on Double Taxation Avoidance

25.11.2011 On the 21th of November 2011 the officials of two powers - Russia and Luxembourg - signed the protocol to the existing agreement between countries on double taxation avoidance.
The major changes will affect taxation of dividends. According to the text of signed protocol the rate of tax at source on dividends will be reduced from 10% to 5%. This rate is applicable when meeting the following conditions e.g.: the recipient company - the resident of a Contracting State - owns shares (amounting at least 10% of capital) of the paying company - the resident of the other Contracting State; investment by the recipient of dividends to the capital of the paying company at least 80 000 euro or equivalent amount in rubles.

Expert’s opinion

“After analyzing the provisions of the signed protocol to the agreement on double taxation avoidance between Russia and Luxembourg, we can infer the presence of both positive and negative aspects for the taxpayer. The first is reducing rates of tax on dividends - Luxembourg here can compete with Cyprus. Negative points are in the cancellation of the agreement provisions in the sphere of double taxation avoidance in the case of share package with 50% or more real estate part realization by one company of the contracting state-party to the other company of the other contracting state-party. Thus income received from realization will be taxed on the territory of realizing company and also income of the receiving company (that receives real estate) will be taxed in another contracting country”.

On the basis: www.mf.public.lu

Vorontsova Maria ( the lawyer of international consulting department of Honest&Bright)