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June 28, 2024

US Treasury suspends key provisions of US-Russia Tax Treaty and Protocol, effective 16 August 2024

In Announcement 2024-26 (Announcement), issued on 21 June 2024, the Internal Revenue Service (IRS) announced that the United States (US) provided, on 17 June 2024, formal notice to the Russian Federation (Russia) to confirm the suspension of specific provisions of the US-Russia Tax Treaty (signed on 17 June 1992) (Treaty), along with the suspension of its accompanying protocol (Protocol), by mutual agreement. The Announcement indicates that the suspension of these provisions will be effective on 16 August 2024 for taxes withheld at source and for other taxes; the suspension will continue until otherwise decided by the two governments. The US Treasury had previously announced the suspension of exchange of tax information with Russia on 5 April 2022.


On 8 August 2023, Russia signed a decree suspending certain income tax treaty benefits with 38 countries, including the United States (August 8 Decree). The August 8 Decree affects Paragraph 4 of Article 1, Articles 5 through 21, and Article 23 of the Treaty, as well as the Protocol. Notice of Russia’s suspension was provided to the United States on the same date. See Tax Alert 2023-1390. The August 8 Decree was ratified into law on 19 December 2023.

In Notice 2024-11, issued on 28 December 2023, the US Treasury and the IRS removed Russia from the list of treaty partner countries that are relevant in determining whether a corporation is a “qualified foreign corporation” for purposes of applying IRC Section 1(h)(11), effective for dividends paid on or after 1 January 2023. See Tax Alert 2024-0127.


Issued almost a year following Russia’s August 8 Decree, the Announcement states that the US provided formal notice to Russia to confirm the suspension of specific provisions of the Treaty. In particular, the suspended provisions are Paragraph 4 of Article 1 (on exceptions to the saving clause of paragraph 3), Articles 5 through 21 (substantive provisions on particular types of income) and Article 23 (the non-discrimination provision), as well as the Protocol, which detailed each country’s respective rights to tax certain categories of income. According to the Treasury press release, the action responds to Russia’s notification of its desire to suspend specific provisions of the Treaty. The provisions of the Treaty impacted by this suspension and described in the Announcement are identical to those suspended by Russia in the August 8 Decree.

Paragraph 4 of Article 1 of the Treaty outlines certain exceptions to the saving clause of Paragraph 3. The Technical Explanation specifies that Paragraph 3 contains the traditional “saving clause,” which permits each country to tax its own residents, citizens, and former citizens in accordance with its domestic law, without regard to the Treaty. Paragraph 4 provides certain exceptions to the saving clause, thereby allowing certain benefits under the Treaty for US residents and citizens, such as correlative adjustments (Article 7(2)), social security exemptions (Article 17(b)), a foreign tax credit under Article 22, the non-discrimination protection of Article 23, and mutual agreement procedures of Article 24. Although it is not one of the articles identified in the Announcement, Article 22 would also be suspended because paragraph 4 of Article 1 is suspended under the Announcement.

The other suspended articles include Article 5, which defines a permanent establishment,  as well as subsequent articles that address the taxation of business profits (Article 6), adjustments to income (Article 7), international transport (Article 8), real property income (Article 9), dividends (Article 10), interest (Article 11), royalties (Article 12), and independent personal services (Article 13). Additional provisions that were suspended cover employment income (Article 14), director’s fees (Article 15), government service (Article 16), pensions (Article 17), income of students, trainees, and researchers (Article 18), other income (Article 19), and capital (Article 21). Finally, Article 20 (limitation on benefits) and Article 23 (non-discrimination) were also suspended.

The Protocol, which was also suspended, clarifies and supplements key provisions of the Treaty, focusing on certain aspects of the taxation of business profits (Article 6), dividends (Article 10), interest (Article 11), independent personal services (Article 13), income from employment (Article 14), other income (Article 19), the limitation-on-benefits provision (Article 20) and relief from double taxation (Article 22).


The US suspension of these Treaty provisions will have significant implications for any taxpayers that are applying the Treaty to cross-border transactions. The suspension of these provisions and Protocol will be effective for taxes withheld at source and for other taxes on 16 August 2024. Thus, for US-source payments made on and after 16 August 2024, reduced rates of withholding tax no longer apply, and US-source payments affected by the suspension will be subject to the 30% statutory rate of withholding tax. Although several key provisions will be suspended as described, the Treaty remains in force until terminated by the United States or Russia in accordance with Article 28 of the Treaty.

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Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor