Beneficial Owner Regulations in Russia Might Remove DTT Benefits to Foreign recipients

The Russian Ministry of Finance has released new guidance that will come as a shock to many foreign owned companies; as the regulations are significantly more severe for foreign recipients of Russian-source income in order to qualify as beneficial owners eligible for Russian tax treaty benefits.

It is intended as an anti-tax avoidance measure, however will now catch many proper holding and treasury companies, intensely accumulating substance or CFC regulations and driving extensive disclosures. Foreign companies who receive passive Russian-source income may consequently be deprived of tax treaty (DTT) benefits unless the holding company can prove sufficient independent business activities in Russia.