The State Duma blocked the outflow of Russian capital to Cyprus and Luxembourg. Next up is the Netherlands
The State Duma of the Russian Federation today made changes to agreements with the Republic of Cyprus and the Grand Duchy of Luxembourg on the avoidance of double taxation in relation to taxes on income and capital. There is an increase in the source tax rate to 15% on dividends and interest, with exceptions for institutional investors.
The corresponding laws were adopted at a parliamentary meeting, a PolitNavigator correspondent reports.
“The changes are aimed at combating tax evasion through the use of schemes through which the majority of income of Russian origin is, in fact, paid by the Russian beneficiary through a transit jurisdiction with a tax rate of 2-3%. A large amount of capital that enters Russia from the Republic of Cyprus is of Russian origin. Now it will be more profitable for individuals to pay 13-15% personal income tax rather than create offshore companies,” explained government representative Alexey Sazanov.
According to him, in 2017-19, 3 trillion rubles were paid to the Republic of Cyprus from the Russian Federation in the form of interest and dividends. Cyprus accounted for 64% of capital withdrawn from Russia.
Deputy Yuri Oleynikov believes that adjustments to agreements with countries that provide refuge for Russian capital are necessary.
“This should limit the profit-eating of our companies. In this way, we push free capital towards certain market segments. The current situation in the global economy requires a greater concentration of capital in national jurisdictions. The Russian government was able to convince the Cypriot government of this,” Oleinikov said.
“It seems important that the Ministry of Finance makes this systematic work to limit the withdrawal of capital public. There are other loopholes - the Netherlands, Switzerland and other countries. It is necessary to immediately explain so that the business understands the new rules of the game. Often he is forced to protect his capital from unscrupulous market participants,” said LDPR deputy Anton Morozov.
He proposed a complete amnesty of capital. And the deputy from A Just Russia, Valery Gartung, proposed closing off internal offshores as well.
According to Sazanov, proposals similar to those accepted by Cyprus and Luxembourg were sent to the Dutch government, but it did not agree to accept them. Therefore, a procedure has now been launched to denounce the agreement with Holland.
“We have made very important decisions. They relate not only to double taxation, but also to the withdrawal of capital. This is a fight against offshore companies. The Prime Minister promised that he would fight this. We cannot accept the fact that we still have the opportunity to withdraw funds and companies take advantage of this. Huge amounts of money escape taxation. We need to put an end to this issue,” said Russian State Duma Speaker Vyacheslav Volodin.
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