Russia: Russia to ratify the multilateral instrument on BEPS

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Russia: Russia to ratify the multilateral instrument on BEPS

Sponsored by

sponsored-firms-kpmg.png
intl-updates-small.jpg

Russia signed the Multilateral Convention to Implement Tax Related Measures to Prevent BEPS (multilateral instrument, or MLI) on June 7 2017.

Russia signed the Multilateral Convention to Implement Tax Related Measures to Prevent BEPS (multilateral instrument, or MLI) on June 7 2017.

Russia is now planning to ratify the multilateral instrument, having drafted a ratification law.

Russia has included 71 of the 84 agreements on the avoidance of double taxation (DTAs) listed by the MLI. However, the draft law on ratification does not cover new DTAs such as the Russia-Japan DTA, or DTAs to be concluded such as the Russia-Sweden DTA.

Remarkably, Russia does not intend to include Germany (which is a major EU trading partner), or Switzerland (where many Russian groups have headquarters and trading companies) on its list.

One of the key provisions Russia has chosen to implement is the simplified limitation on benefits (S-LoB) test. This is rarely chosen by countries signing the MLI, most of which prefer the principal purpose test (PPT test). The list of countries using S-LoB is rather short, but includes Greece, Iceland, India, and Kazakhstan, among others.

Even if a treaty partner has not chosen to implement the S-LoB test, there is already a fairly strict domestic beneficial ownership (BO) test in place to check the eligibility of foreign companies to use a treaty to receive Russian-sourced income. The tests overlap, and in certain cases, the BO requirements are far more stringent than those in S-LoB.

Additionally, over the past decade, Russia has consistently changed its DTAs in order to re-allocate taxation rights to capital gains derived from the sale of Russian property-rich companies back to Russia. In line with this, Russia has included this right in its MLI position.

However, only a small number of treaties will be amended (e.g. Italy and Turkey), whereas many others will remain untouched, such as the Russia-Netherlands DTA, despite lots of Russian real estate being held through Dutch holding companies.

These are some of the noteworthy examples regarding Russia's MLI position. There are many more provisions which should be thoroughly reviewed and analysed in light of MLI ratification in Russia.

It is expected that if ratification occurs in 2019, the MLI may take effect from January 1 2020. Therefore, the available time to adapt to structures in the MLI is shrinking, and immediate action may be needed in order to have sufficient time to undertake restructuring where necessary.

more across site & shared bottom lb ros

More from across our site

The ruling is ‘well-structured’ in its references to the OECD TP guidelines, one expert says, while another argues it overlooks key technical issues
India also brokered its first-ever multilateral APA last year, the Central Board of Taxes announced
A global tax framework may not materialise anytime soon, but a common set of principles is becoming increasingly necessary, Rudolf Winkenius also tells ITR
Kingsley Napley’s claimants are arguing that taxing the provision of education breaches the European Convention on Human Rights
While pillar two can progress without the US, it won’t reach the same heights without American involvement, argues Renáta Bláhová, founding partner of BMB Partners Taxand
There are unanswered questions as to how foreign investors could reclaim money via tax credits, advisers suggested
Amid an ever-changing tax environment, India’s advisory market is bustling with competition ahead of the 2025 World Tax rankings and ITR Awards
The deal comes after PwC had accused Paul McNab of using confidential information; in other news, McDermott hired a new London tax head from a US rival
Looking at transfer pricing simplification is “obviously helpful”, but it should be done in line with current standards, a senior government figure reportedly said
The UK Government’s plans to close the tax gap via increased HM Revenue and Customs investment have failed to impress local tax advisers
Gift this article