Russia Clarifies The Conditions For Claiming Permanent Residence And Beneficial Ownership For Tax Treaty Purposes

; posted on
January 31st, 2019

Russia through its Guidance Letter 03-08-05/92537 and Order Number MMB-7-2/824 clarifies the conditions for claiming permanent residence and beneficial ownership for tax treaty purposes.

Details

Nonresident legal entity allows claiming eligibility for a beneficial tax regime under the tax treaty if it provides the Russian income payer (tax agent) with confirmation of its permanent residence in a country, with which Russia has an effective tax treaty, before the actual payment of the income. Furthermore, the nonresident must also provide confirmation that it is the beneficial owner of the Russian-source income.

As Russia’s tax legislation does not regulate the substantive criteria or formal requirements for documentation confirming a legal entity’s tax residence, the legal entity could use the documents issued by the competent authorities of the foreign country at issue as proof to Russian competent authority to confirm its residency.

The document confirming the tax residence of a taxpayer in a foreign state may indicate a specific time period within which the taxpayer's status as a tax resident of that state has been confirmed. However, if the document does not indicate such a time period, the taxpayer is deemed to be a tax resident of that state for the duration of the calendar year in which the document was issued.

Related to the beneficial ownership disclosure, the following documents and information are required by the competent authority to assess whether the recipient income is the actual beneficial owner of the Russian income for treaty purpose:

  • documents and other information confirming that the income recipient is a resident of a jurisdiction that has an effective tax treaty with Russia and has incurred tax payment liabilities. In addition, such information also should confirm that it does not register tax savings at the source of payment in Russia if the income is later transferred to third parties that reside or are registered in jurisdictions with which Russia does not have an effective tax treaty; and 
  • documents and other information confirming that the income recipient actually carries out business activities in the jurisdiction (with an effective tax treaty with Russia) in which it resides or is registered.

Due Date

According to Order No. MMB-7-2/824, when requested by the tax authorities, information on beneficial owners should be submitted within 5 business days of the request.

Source: Russian Government

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