US Tax Newsroom

 Tax News Update    Email this document    Print this document  

May 13, 2020
2020-1284

Russia notifies OECD of entry into effect of the MLI for 27 of its tax treaties from 1 January 2021

On 30 April 2020, Russia officially submitted to the Organisation for Economic Co-operation and Development (OECD) Depositary a notification1 of the completion of its internal procedures for the entry into effect of the provisions of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) with respect to 27 double taxation treaties with the following jurisdictions:

Australia
Ireland
Poland

Austria
Israel
Qatar

Belgium
Latvia
Serbia

Canada
Lithuania
Singapore

Denmark
Luxembourg
Slovakia

Finland
Malta
Slovenia

France
Netherlands
Ukraine

Iceland
New Zealand
United Arab Emirates

India
Norway
United Kingdom

Subject to the reservations made by Russia pursuant to Articles 35(7)(a)(i) and 35(7)(b), the MLI will take effect for the respective tax treaties from 1 January 2021 (for both withholding tax and other taxes).

Russia ratified the MLI in May 2019,2 with reference to 71 covered jurisdictions. The information published by the OECD does not specify why Russia's notification of the entry into effect of the MLI only covers 27 jurisdictions. No official comments have yet been received from the Russian fiscal authorities.

The MLI was developed by the OECD to combat abuses of double taxation treaties whereby profits are artificially moved from one state to another to make use of lower tax rates or tax exemptions available in other states.

The MLI supplements and modifies some of the provisions of existing tax treaties. In particular, the MLI introduces the principal purpose test (PPT), which allows tax authorities to disallow the application of treaty benefits if obtaining those benefits was the principal purpose or one of the principal purposes of an arrangement or transaction. The PPT will be applied alongside the beneficial ownership concept, which is already incorporated in tax treaties.

———————————————
ENDNOTES

1 http://www.oecd.org/tax/treaties/beps-mli-notification-article-35-7-b-russian-federation.pdf.

2 Federal Law No. 79-FZ of 1 May 2019 "On Ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting."

———————————————
CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young, Moscow

  • Vladimir Zheltonogov
    vladimir.zheltonogov@ru.ey.com
  • Kristina Tokareva
    kristina.tokareva@ru.ey.com

Ernst & Young LLP (United States), Russian Tax Desk, New York

  • Kirill Lukyanets
    kirill.v.lukyanets1@ey.com

———————————————
ATTACHMENT

PDF version of this Tax Alert

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2021, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement