Russia turns its sights on Hong Kong and Singapore

Russia’s Finance Ministry said it does not rule out inviting Hong Kong and Singapore to adjust their respective double tax agreements (DTAs) with Russia to allow for higher withholding taxes to be levied to generate more tax revenue for Russia.

In March 2020, President Vladimir Putin announced his intention to revise a number of Russia’s DTAs to increase the dividend withholding rate to 15%, while retaining a reduced 5% withholding tax for public companies, and an increase in the interest rate from zero to 15%. He warned that Russia would unilaterally withdraw from treaties with countries that fail to accept these terms.

Since then, Russia has negotiated and signed new protocols to amend its DTAs with Cyprus, Malta and Luxembourg on 8 September, 1 October and 6 November 2020 respectively. However, it failed to reach agreement with the Dutch government and, in June this year, gave a notice of termination in respect of its existing DTA with the Netherlands – the final step in the process of denouncing the treaty.

“We are negotiating with a number of nations,” said Dmitry Birichevsky, Director of the Department of Economic Cooperation in the Russian Foreign Ministry. “As far as we know, there is a proposal to revise the bilateral agreement with Switzerland. The finance ministry does not rule out inviting Hong Kong and Singapore to revise relevant bilateral agreements. According to expert estimates, this could cover around 90% of the so-called transit jurisdictions.”