Double taxation in Russia

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Double taxation is the simultaneous imposition of the same income taxes in different countries. Double taxation is caused by the fact that a tax non-resident must pay taxes at the same time both at the place of his actual location and at the place of his citizenship.

To pay tax rationally, countries sign agreements to avoid double taxation. The agreements help relieve businesses of the large tax burden that can arise when paying income from a resident of one country to a resident of another country.

If, in accordance with the norms of the Tax Code, the tax rate is set at 10%, and in the international agreement – 5%, then the taxpayer has the right to apply the established minimum rate.

To apply preferential taxation in accordance with the terms of international agreements, it will be necessary to prove that his partner is the actual recipient of the profit, and the counterparty is located abroad. Mandatory requirements:

a. the foreign partner is obliged to provide the Russian tax agent with proof that he is the actual beneficiary and is located on the territory of the state with which Russia has an agreement.

b. Documents drawn up in a foreign language must be translated into Russian.

According to tax legislation, the following documents must be submitted:

• certified by a competent foreign authority (these include financial and fiscal departments of foreign states) confirmation of the permanent residence of a resident in this foreign state (+ translation into Russian);

• documentary evidence that the foreign recipient of income has the actual right to it.

To reduce the tax burden of Russian merchants, the Russian government concludes double taxation avoidance agreements with the leaders of other countries. An international agreement on the avoidance of double taxation is signed by the Government of Russia with the government of another foreign state.

These agreements take precedence over the tax legislation of the Russian Federation. But to apply them, the Russian taxpayer and his counterparty must comply with all the conditions of the international treaty and provide the Federal Tax Service with the documents accompanying the transaction.