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16.05.2016

Elimination of double taxation for personal income tax, taking into account 376-FZ

Situations often arise when the income of a resident taxpayer Russian Federation, received by him abroad, is taxed twice - once abroad and the second time in the Russian Federation. A similar situation may occur with regard to the income of non-residents of the Russian Federation, as well as residents of the Russian Federation - foreign citizens.

In this article we will consider the procedure for eliminating double taxation on income tax individuals.

The obligation to pay tax arises when there is an object of taxation.

For personal income tax, the object of taxation is income received by an individual taxpayer (Article 209 of the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation)).

Income in accordance with Article 41 of the Tax Code of the Russian Federation is recognized as an economic benefit in monetary or in-kind form, taken into account if it is possible to evaluate it and to the extent that such benefit can be assessed, and determined in accordance with Chapter 23 “Tax on personal income” of the Tax Code RF.

Income can be received both from sources in the Russian Federation and from sources outside the Russian Federation. Moreover, taxpayers who are tax residents of the Russian Federation must pay personal income tax on the two above-mentioned incomes, and taxpayers who are not tax residents of the Russian Federation only on income received from sources in the Russian Federation.

For tax purposes, determining the status of an individual as a tax resident of the Russian Federation is made to apply the provisions of Article 209, paragraph 1 of Article 232 of the Tax Code of the Russian Federation in situations where, in particular, international double taxation is eliminated.

Based on paragraph 2 of Article 207 of the Tax Code of the Russian Federation, tax residents are individuals who are actually located in the Russian Federation for at least 183 calendar days within 12 consecutive months.

As noted in the letter of the Ministry of Finance of Russia dated August 14, 2009 No. 03-08-05, citizens of any state can be tax residents of the Russian Federation, as well as non-residents. That is, citizens of the Russian Federation who stay in the Russian Federation for less than 183 days over the next 12 consecutive months will not be recognized as tax residents of the Russian Federation.

According to the letter of the Ministry of Finance of Russia dated April 18, 2007 No. 01-СШ/19, sent to the Federal Tax Service of Russia, the establishment of this fact (residence) is associated with the taxpayer’s obligation to calculate and pay tax on the income received by him for the relevant tax period (calendar year).

At the same time, confirmation of the status of an individual as a tax resident of the Russian Federation for the purpose of applying international treaties on the avoidance of double taxation, that is, when such person receives income from sources in another state, is made for any past expired tax period (calendar year) or for the current tax year period (but not earlier than July 3 of such calendar year).

In addition, from letter No. 01-СШ/19 it follows that the accounting of the number of days of an individual’s stay in the Russian Federation during a 12-month period starting in one and ending in the next calendar year is made on the date such person receives income, tax which is subject to withholding by the tax agent, as indicated in the letter of the Federal Tax Service of Russia dated February 12, 2014 No. OA-4-13/2213. In this case, copies of documents confirming the number of days of an individual’s stay in the Russian Federation must be requested directly from citizens.

Issues of eliminating double taxation when paying personal income tax are regulated by Article 232 of the Tax Code of the Russian Federation, which we have already mentioned above.

Tax amounts actually paid by a taxpayer who is a tax resident of the Russian Federation outside the Russian Federation in accordance with the legislation of other states on income received outside the Russian Federation are not counted when paying tax in the Russian Federation, unless otherwise provided by the relevant treaty (agreement) on avoidance of double taxation (clause 1 of Article 232 of the Tax Code of the Russian Federation).

Thus, to eliminate double taxation, states enter into treaties (agreements) between themselves on the avoidance of double taxation.

Please note that the list of international treaties on the avoidance of double taxation between the Russian Federation and other states in force as of January 1, 2013 is given in the Information Letter of the Ministry of Finance of Russia.

Explanations on the application of treaties (agreements) on the avoidance of double taxation are given in letters of the Ministry of Finance of Russia dated August 31, 2010 No. 03-04-08/4-189, dated October 13, 2009 No. 03-08-05, dated October 8, 2008 No. 03-08-05/5, dated October 8, 2008 No. 03-08-05/4 (Federal Republic of Germany), dated August 21, 2008 No. 03-08-05 (Israel), dated August 12, 2008 No. 03 -08-05 (Italian Republic), Federal Tax Service of Russia for the city of Moscow dated March 4, 2010 No. 20-14/3/022678, dated January 21, 2010 No. 20-15/3/4613, dated April 28, 2009 No. 20- 15/3/041871@ (Republic of Turkey).

Many Agreements contain provisions on non-discrimination against citizens of contracting states. The definition of non-discrimination specified in double tax treaties, taking into account international practice means that if a tax is levied on foreign and on one's own national persons under the same circumstances, it must be in the same form as in respect of tax base, and the method of its assessment, the rate of which should be the same. Formalities related to taxation (declaration, payments, prescribed deadlines, etc.) should not be more burdensome for foreigners than for their own nationals.

Different personal income tax rates are applied depending on the tax residence, and not on the citizenship of the person, and are not discriminatory.

This means that the income of a citizen of the Russian Federation and, for example, a citizen of the Republic of Lithuania, who are on the territory of the Russian Federation for less than 183 days within 12 consecutive months (that is, are not tax residents of the Russian Federation), are equally taxed with personal income tax at a rate of 30% . A similar opinion was expressed, in particular, in the letter of the Ministry of Finance of Russia dated August 19, 2008 No. 03-04-05-01/305.

As stated in the letter of the Ministry of Finance of Russia dated November 2, 2011 No. 03-04-05/8-852, a taxpayer who is a tax resident of the Russian Federation, when receiving income from sources outside the Russian Federation, is obliged to include such income in the tax return for personal income tax persons, while the amount of tax paid in another state is not counted when paying tax in the Russian Federation.

Thus, a taxpayer who is a resident of the Russian Federation does not have the right to offset the tax he paid abroad against the payment of personal income tax in the Russian Federation.

However, if the provision for such an offset is provided for by the relevant treaty (agreement) on the avoidance of double taxation, then it is still possible to offset the tax. Thus, the letter of the Ministry of Finance of Russia dated May 4, 2008 No. 03-04-05-01/145 discusses the situation when individual entrepreneur– a resident of the Russian Federation receives income from a source in the Republic of Belarus. Answering the question whether tax amounts on this income paid in the Republic of Belarus can be offset if personal income tax payment in the Russian Federation, received from sources in the Republic of Belarus, the Ministry of Finance of Russia clarifies that the Agreement between the Government of the Russian Federation and the Government of the Republic of Belarus of April 21, 1995 “On the avoidance of double taxation and the prevention of tax evasion in relation to taxes on income and property” ( hereinafter referred to as the Agreement between the Russian Federation and the Republic of Belarus) provides for the offset of tax paid in a foreign country.

Therefore, amounts of tax on income received by a resident of the Russian Federation from a source in the Republic of Belarus, paid in the Republic of Belarus, can be offset when paying tax in the Russian Federation in accordance with the provisions of the said Agreement between the Russian Federation and the Republic of Belarus and the Tax Code of the Russian Federation.

Similar conclusions were made in letters of the Ministry of Finance of Russia dated November 21, 2012 No. 03-04-05/4-1325, dated October 16, 2012 No. 03-08-05, Federal Tax Service of Russia dated March 27, 2009 No. 3-5-04/329 @, dated June 1, 2009 No. 3-5-04/721@, Federal Tax Service of Russia for the city of Moscow dated April 8, 2009 No. 20-14/4/033584.

If income is exempt from taxation in Russia, then there are no grounds for offsetting the paid “foreign” tax (letter of the Ministry of Finance of Russia dated May 7, 2010 No. 03-04-06/6-90).

By virtue of paragraph 2 of Article 232 of the Tax Code of the Russian Federation, unless otherwise established by the Tax Code of the Russian Federation, for exemption from tax payment, offset, receipt tax deductions or other tax privileges, the taxpayer must submit to the tax authorities:

– official confirmation that he is a resident of the state with which the Russian Federation has concluded an agreement valid for the relevant period tax period(or parts thereof) agreement (agreement) for the avoidance of double taxation;

– a document confirming the income received and the payment of tax outside the Russian Federation, confirmed by the tax authority of the relevant foreign state.

In a letter dated August 29, 2014 No. 03-04-06/43394, the Russian Ministry of Finance explained that confirmation can be submitted both before payment of tax or advance payments thereon, and within one year after the end of the tax period based on the results of which the taxpayer claims to receive tax exemption, offset, tax deductions or other tax privileges.

This confirmation must be submitted to the tax authority, as well as to the tax agent, for whom this confirmation serves as the basis for non-withholding of personal income tax when paying income or taxing it at the rates provided for in the relevant agreement.

Thus, if an individual who is a resident of a foreign state with which the Russian Federation has concluded an agreement on the avoidance of double taxation, has provided the tax agent with confirmation that he is a resident of this foreign state, and his income received under an agreement with the organization - tax agent, in accordance with with the said agreement are not subject to taxation in the Russian Federation, the tax agent has the right not to withhold personal income tax from such income.

Since the Tax Code of the Russian Federation has not established a special procedure for the return of amounts of personal income tax withheld by tax agents from the income of individuals who are residents of foreign states before they submit the appropriate confirmation, one should proceed from the provisions of Article 78 of the Tax Code of the Russian Federation, taking into account the deadline for submitting confirmation of resident status established in Article 232 of the Tax Code of the Russian Federation.

If the organization has confirmation of the status of an individual as a resident of the relevant foreign state, the organization does not need to send documents to the tax authority at the place of its registration for non-withholding tax on income exempt from taxation in accordance with the international treaty for the avoidance of double taxation.

The responsibility for submitting the relevant documents to the tax authority rests with the taxpayer.

Similar clarifications are contained in the letter of the Ministry of Finance of Russia dated May 23, 2014 No. 03-04-05/24803, which also notes that submission to the tax authority of confirmation of tax payment in a foreign country is required only in cases of offset in the Russian Federation of the amounts of taxes paid in this foreign country.

Note!

As the capital's tax authorities indicate in their letters dated March 4, 2010 No. 20-14/3/022678, dated January 21, 2010 No. 20-15/3/4613, in addition to confirmation, the taxpayer must also submit an application for tax privileges. However, the current tax law does not contain such a requirement.

The issuance of documents confirming the status of a tax resident of the Russian Federation is carried out by the Interregional Inspectorate of the Federal tax service on centralized data processing (letters of the Federal Tax Service of Russia dated March 13, 2013 No. ED-3-3/852@, dated August 24, 2012 No. OA-3-13/3067@, Federal Tax Service of Russia for the city of Moscow dated October 21, 2009 No. 13 -11/110015).

The Information Message of the Federal Tax Service of Russia “On the procedure for confirming the status of a tax resident of the Russian Federation” (hereinafter referred to as the Information) establishes the procedure for confirming the status of a tax resident of the Russian Federation.

According to the Information, the Confirmation is issued in one copy, except for the following cases:

– if, in accordance with the legislation of a foreign state, two or more copies of the Confirmation are required to be submitted simultaneously to the tax authority of a foreign state, then provided that the competent authorities of the specified state in in the prescribed manner notified the Federal Tax Service about the specified provisions of the legislation, the corresponding number of copies of the Confirmation is issued;

– if the taxpayer needs two or more copies of the Confirmation for one calendar year to be sent to several counterparties, if there is an appropriate package of documents for each of the counterparties, one copy of the Confirmation is issued for each counterparty.

Confirmation can be issued not only for the current calendar year, but also for previous years, subject to the availability of all necessary documents corresponding to the requested period.

Confirmation of the status of a tax resident of the Russian Federation is carried out:

– issuing a certificate of the established form;

– certification by signature and seal of the form of the document established by the legislation of the foreign state (if such forms are available and the Federal Tax Service of Russia is informed about this by the competent authorities of the relevant state).

The period for consideration of applications for issuance of a Confirmation is 30 calendar days from the date of receipt of all necessary documents by the Interregional Inspectorate of the Federal Tax Service of Russia.

According to paragraph 3 of Article 232 of the Tax Code of the Russian Federation, when calculating the amount of tax in relation to the income of a controlled foreign company the procedure for crediting the amount of tax paid in a foreign country, provided for in paragraph 11 of Article 309.1 of the Tax Code of the Russian Federation, is applied. Based on this norm, the amount of tax calculated in relation to the profit of a controlled foreign company for the corresponding period may be reduced, in particular, by the amount of tax calculated in relation to this profit in accordance with the legislation of foreign countries. To do this, it is necessary that such a value be documented. If the Russian Federation does not have a valid international treaty of the Russian Federation concluded with the state (territory) on taxation issues, then the taxpayer must have the supporting documents certified by the competent authority of the foreign state, which is authorized to exercise control and supervision in the field of taxes.

In conclusion, I would like to draw your attention to the fact that since January 1, 2016, Article 232 of the Tax Code of the Russian Federation has been amended by Federal Law No. 146-FZ of June 8, 2015 “On Amendments to Chapter 23 of Part Two of the Tax Code of the Russian Federation.”

According to these changes, amounts of tax on income received in a foreign state actually paid by an individual who is a tax resident of the Russian Federation outside the Russian Federation in accordance with the legislation of other states will not be counted when paying tax in the Russian Federation, unless otherwise provided by the relevant international treaty Russian Federation on taxation issues.

If an international treaty of the Russian Federation on taxation issues provides for a credit in the Russian Federation for the amount of tax paid by an individual who is a tax resident of the Russian Federation in a foreign state from the income received by him, such a credit will be made by the tax authority in the manner established by paragraphs 2 - 4 of the article 232 of the Tax Code of the Russian Federation.

Based on the updated paragraph 2 of Article 232 of the Tax Code of the Russian Federation, the offset in the Russian Federation of the amount of tax paid by an individual who is a tax resident of the Russian Federation in a foreign state on the income received by him will be made at the end of the tax period. The basis for the offset will be the tax return submitted by such an individual, which must indicate the amount of tax paid in a foreign country to be offset. Please note that the amounts of tax paid by an individual - a tax resident of the Russian Federation in a foreign state on income received by him, subject to offset in the Russian Federation, can be declared in tax returns submitted within three years after the end of the tax period in which such income was received. income.

For the purpose of offset, it is necessary to attach to the tax return documents confirming the amount of income received in a foreign country and the tax paid on this income in a foreign country, issued (certified) authorized body of the relevant foreign state, and their notarized translation into Russian (clause 3 of Article 232 of the Tax Code of the Russian Federation).

The documents attached to the tax return must reflect the type of income, the amount of income, the calendar year in which the income was received, as well as the amount of tax and the date of its payment by the taxpayer in a foreign country.

Instead of specified documents the taxpayer has the right to submit a copy of the tax return submitted by him in a foreign country, and a copy of the payment document on payment of tax and their notarized translation into Russian.

If tax on income received in a foreign country was withheld at the source of payment of income, necessary information about the amounts of income and the amounts of tax paid, withheld at the source of payment of income in a foreign country, are submitted by the taxpayer on the basis of a document issued by the source of payment of income, together with a copy of this document and its notarized translation into Russian.

Please note that the amount of tax to be credited will be determined taking into account the provisions of the relevant international tax treaty of the Russian Federation. When calculating the amount of tax credited in the Russian Federation, the provisions of the Tax Code of the Russian Federation will be applied, which apply to the procedure for calculating tax in the tax period in which the income was received in a foreign state (clause 4 of Article 232 of the Tax Code of the Russian Federation).

According to paragraph 5 of Article 232 of the Tax Code of the Russian Federation, if an international treaty of the Russian Federation on taxation issues provides for complete or partial exemption from taxation in the Russian Federation of any types of income of individuals who are tax residents of a foreign state with which such an agreement has been concluded, exemption from payment (withholding) of tax at the source of payment of income in the Russian Federation or the return of previously withheld tax in the Russian Federation will be made in the manner established by paragraphs 6 - 9 of Article 232 of the Tax Code of the Russian Federation.

Thus, paragraph 6 of Article 232 of the Tax Code of the Russian Federation determines that, unless otherwise provided by the Tax Code of the Russian Federation, the tax agent - the source of payment of income when paying such income to an individual does not withhold tax (or withholds it in a different amount than provided for by the provisions of the Tax Code of the Russian Federation) in the case if this individual is a tax resident of a foreign state with which the Russian Federation has concluded an international treaty on taxation issues, providing for full or partial exemption from taxation in the Russian Federation of the corresponding type of income. To confirm the tax resident status of such a foreign state, an individual has the right to present a passport to the tax agent - the source of income foreign citizen or another document established by federal law or recognized in accordance with an international treaty of the Russian Federation as an identification document of a foreign citizen.

If the above-mentioned documents do not allow confirming that a foreign citizen has the status of a tax resident of a foreign state with which the Russian Federation has concluded an international tax treaty, on the basis of which income is exempt from taxation in the Russian Federation, the tax agent - the source of payment of income to the individual requests of this individual, official confirmation of his status as a tax resident of a state with which the Russian Federation has concluded an international treaty on taxation issues.

Please note that this confirmation must be issued by the competent authority of the relevant foreign state, authorized to issue such confirmations on the basis of an international treaty of the Russian Federation on tax matters. If such a confirmation is drawn up in a foreign language, the individual must also submit a notarized translation into Russian.

If confirmation of the status of a tax resident of a foreign state is submitted by an individual to a tax agent - the source of payment of income after the date of payment of income subject to exemption from taxation on the basis of an international treaty of the Russian Federation on taxation issues, and withholding tax on such income, such tax agent shall refund the withheld tax in the procedure provided for in clause 1 of Article 231 of the Tax Code of the Russian Federation for the return of amounts of overpaid tax (clause 7 of Article 232 of the Tax Code of the Russian Federation).

Information about foreign individuals and about income paid to them, from which tax was not withheld on the basis of an international treaty of the Russian Federation on taxation issues, about the amounts of tax returned by the tax agent - the source of payment of income, is submitted by such tax agent to the tax authority at the place of its registration within thirty days from the date of payment of such income (clause 8 of Article 232 of the Tax Code of the Russian Federation).

The specified information must allow identification of the taxpayer, the type of income paid, the amount of income paid and the date of their payment. Information that allows the taxpayer to be identified includes, among other things, passport data and an indication of citizenship.

If there is no tax agent on the date an individual receives confirmation of the status of a tax resident of a foreign state, giving the right to exemption from paying tax on the basis of an international treaty of the Russian Federation on taxation issues, such an individual has the right to submit confirmation of the status of a tax resident of a foreign state and its notarized translation to Russian language, together with an application for a tax refund, a tax return and documents confirming the withholding of the tax and the grounds for its refund, to the tax authority at the place of residence (place of stay) of the individual in the Russian Federation, and in the absence of a place of residence (place of stay) of the individual persons in the Russian Federation to the tax authority at the place of registration of the tax agent.

Refunds of tax amounts will be made by the tax authority in the manner prescribed by Article 78 of the Tax Code of the Russian Federation (clause 9 of Article 232 of the Tax Code of the Russian Federation).

International treaties of the Russian Federation with other countries have priority over national legislation. Therefore, given the active cooperation of Russian companies with foreign jurisdictions, issues of regulating the avoidance of double taxation are becoming increasingly relevant.

Currently, the Russian Federation has concluded and ratified treaties on the avoidance of double taxation with more than 60 countries. We will look at the features of agreements with the five most popular jurisdictions in Russia: Cyprus, Great Britain, Germany, the Netherlands and the USA. Moreover, both regarding the income of Russian companies on the territory of these states, and the funds paid Russian companies to foreigners.

EXPERT COMMENT
Oleg MOSKVITIN, expert of the legal consulting service of the GARANT company:
- The considered jurisdictions are the most popular Western jurisdictions in Russia. However, when tax planning business activity it is necessary to take into account not only the “letter” of a particular agreement, but also the practice of its reading by the tax authorities of both jurisdictions. Probably, many remember the conflict three years ago that flared up around Aeroflot and Air China due to different interpretations of the rules of the agreement by the tax authorities of Russia and China. By ignoring such circumstances, the company risks becoming hostage to the struggle for the interests of two budgets, which does not always end after the signing and ratification of the agreement.

Let’s make a reservation right away: the agreements establish the specifics of taxation of only certain types of income (we consider them below). All other income of a company resident in one state, regardless of the source of its origin, is taxed only in the state of which the recipient is a resident.

“Agreements can only be applied if the party paying the income is presented with a document confirming residence”

OPINION PRACTICE
Roman OMELYANCHUK, Financial Manager:
- The application of international agreements is possible only if the party paying the income is provided with a document confirming residence before the date of issue of the income.

This document is a tax certificate. It must have an apostille (Hague Convention of 05.10.61) or undergo the consular legalization procedure (also have a notarized translation). I note that in the USA legalization is allowed through the use of an affidavit followed by notarization. At the same time, despite the agreements of the tax service of the Russian Federation and the competent authorities of the countries participating in the agreements (for example, the US Internal Revenue Service), the use of tax certificates without an apostille (or consular legalization) leads to tax risks(Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated June 28, 2005 No. 990/05). The certificate must also indicate the period of time for which it applies. Please note that in some countries the financial year does not correspond to the calendar year. While the document is issued for a financial year (for example, in the USA). And you can receive the document only after submitting the reports. Therefore, a situation arises in which the US Internal Revenue Service provides a certificate indicating the year, but the Russian tax authorities apply it only during the calendar year. This circumstance causes a certain documentary gap, which must be taken into account when planning payments.

PROFIT FROM BUSINESS ACTIVITIES

Regarding profit from entrepreneurial activity all agreements establish general rule. Profit received by a non-resident in another state (for example, a Russian company abroad) is taxed in that foreign state only if it is received through a permanent establishment. The profits of a non-resident may be taxed in another state only to the extent that they are attributable to the permanent establishment. A permanent establishment exists when the following basic conditions are met:

• there is a place of activity, that is, a premises (office, workshop, warehouse, structure or installation, construction site, etc.);
• the place of activity must have a certain degree of permanence (where this is required for the conduct of the activity). There are a number of exceptions to this rule when the activities of a non-resident can be considered as activities through a permanent establishment without a fixed place: construction of roads, pipelines, well exploration, etc. In this case, the economic integrity of the project being carried out is taken into account;
• the company carries out fully or partially commercial activities through the place of activity. But there is an exception. A non-resident will be considered to have a permanent establishment (even in the absence of a permanent place of business) if he carries out activities through an agent with a dependent status.
• But a permanent establishment does not arise when carrying out activities of an auxiliary and preparatory nature. This includes:
• use of facilities solely for the purpose of storing, displaying or delivering goods;
• maintaining a stock of goods solely for the purpose of processing by another enterprise;
• maintaining a permanent place of business solely for the purpose of purchasing goods or collecting (distributing) information.

Therefore, even if a non-resident carries out the above types of activities through a permanent place, such as an office, these activities cannot be considered as carried out through a permanent establishment. Accordingly, the income of such a company will not be taxed in the territory of a foreign state.

ASSOCIATED COMPANIES

Among the agreements under consideration, it is worth highlighting the agreements with Cyprus and the Netherlands, in which the concept of associated enterprises appears. Associated enterprises are those companies between which, in their commercial and financial relationships, conditions are created or imposed that are different from those that would exist between two independent companies. The treaties provide that in such a case, any profits that would have accrued to one of the companies, but because of the existence of these conditions were not accrued, may still be included in the profits of that company and taxed accordingly.

That is, if a Russian company in Cyprus could have accrued profit, but due to the direct or indirect participation of a Cypriot company in its management, such profit was not accrued to it, such profit is subject to tax in the Russian Federation.

EXPERT COMMENT
Olga MATTEYS,
- Additional tax rules in the case of transactions between associated companies, established in many international agreements, are provided as protective measures against the distribution of profits within multinational groups. The problem of loss of income of individual states due to the use of transfer pricing is relevant for many countries with relatively high level tax burden, especially when residents of these states cooperate with residents of low-tax territories, such as Cyprus.

REAL ESTATE

To income from not movable property agreements include income received from direct use, rental or use of real estate in any other form. Such income may be taxed in the state in which the property is located.

At the same time, sea, river and aircraft vessels are not considered as real estate. Accordingly, income from the direct use of sea, river and aircraft is taxed in the same manner as other income from business activities. That is, in the general case - in the state of which the recipient of the income is a resident. A number of agreements (for example, USA, UK) with regard to income from the operation of sea, river and aircraft expressly state that they are taxed in the state of which the recipient of the income is a resident. Note that income from real estate may arise not only from its use, but also from its sale. According to the agreements, income from the sale of real estate is also taxed in the territory of the state in which it is located.

In addition to income from the use and sale of real estate on the territory of a foreign state, the owner of such property also has other objects of taxation regulated by agreements, namely capital. Of the agreements under consideration, only the convention with the UK does not regulate the taxation of capital represented by real estate. The remaining agreements stipulate that capital represented by the real estate of a non-resident in another state is subject to tax (in Russia - property tax) in the state in whose territory the real estate is located.

OPINION PRACTICE
Roman OMELYANCHUK, Financial Manager:
- Article 309 of the Tax Code of the Russian Federation provides for the withholding of income tax at the source of payment when selling shares of companies whose assets consist of more than 50 percent of real estate. For example, the Agreement with the Republic of Cyprus allows for taxation in the country of origin of income. It is possible to bypass this norm by “pumping” companies with money, which will dilute the share of real estate in assets (financial assistance, additional issue, lengthening the shareholder chain).

ALIGNATION OF MOVABLE PROPERTY

Regarding income from the alienation of movable property, each of the agreements under consideration has its own peculiarities.

Thus, according to an agreement with the Netherlands, income received by a resident of Russia from the alienation of any movable property (including aircraft and ships) located in Holland is taxed exclusively in Russia. The same procedure is established by agreements with Cyprus, Germany and Great Britain. But in the UK there is an exception: income that a Russian resident receives from the alienation of shares in a British company, the value of which, or a major part of it, is directly or indirectly related to immovable property located in the UK, will be taxed in the UK.

In the agreement with the United States there is no procedure at all for taxation of income from the alienation of property. This means that income from the sale of such property will be taxed in the state of which the seller of the property is a resident.

EXPERT COMMENT
Alexander ANISCHENKO, auditor of LLC "Auditing Firm "Atoll-AF"":
- If the agreement does not contain a procedure for taxing income from the sale of real estate to a foreigner, in Russia Article 309 of the Tax Code of the Russian Federation should be applied. It says that if a foreign organization sells real estate located on the territory of the Russian Federation, then the income received, if it is not related to the business activities of a foreign resident in Russia, relates to his income from sources in the Russian Federation. The tax withholds the source of payment of income (subclause 6, clause 1, article 309 of the Tax Code of the Russian Federation).

SEA AND AIR TRANSPORTATION

Revenue from maritime and air transport means income received from the operation of ships and aircraft by their owners (in the agreement with Cyprus, also by lessees or charterers). In particular, these are incomes:

• from leasing ships and aircraft when using them in international transport;
• from the rental of containers and related equipment related to the operation of ships or aircraft.

Such income is taxed in the state of which the recipient is a resident.

EXPERT COMMENT
Andrey MOROZOV,
- In relation to sea and air transportation, it should be noted that they are taxed in the resident state if the transportation is international. Typically, the definition of international transport is contained in the relevant double tax treaty. Transportation by sea or aircraft is considered such, except in cases where transportation is carried out exclusively between points located in the territory of one of the contracting states. Therefore, for example, when a resident of one state carries out transportation between points located on the territory of another state, such transportation is not considered international and the state on whose territory such transportation is carried out has the right to impose taxes on such income.

At the same time, there are peculiarities in Cyprus and Germany. The agreement with Germany extends the above provisions also to income from the operation of river transport, and the agreement with Cyprus - to income from the operation of road transport.

ATTRACTING FOREIGN LOANS

When a Russian company attracts a foreign borrowed capital, it pays residents of foreign countries income in the form of interest. These include income from debt claims of any kind, in particular income from government securities, bonds and debentures, including premiums and winnings on such securities, bonds or debentures.

EXPERT COMMENT
Andrey MOROZOV, Head of the legal department of the company "MCFER-consulting":
- It should be noted that the possibility of applying a double tax treaty to interest income may be determined by the place of origin of such income. Some agreements explicitly state what is meant by the place where interest arises (for example, agreements with the Netherlands, Cyprus, Germany), while others do not have such a definition. In this regard, approaches to the taxation of interest may differ. In addition, the definition of interest itself may vary between agreements.

Interest is taxed in the state of which the recipient is a resident. That is, if a Russian organization pays interest to an American organization, then it is taxed only in the United States. However, if a US company receiving interest carries on business in Russia through a permanent establishment located there and the debt claim on which the interest is paid is attributable to such permanent establishment, income from such interest will be taxed in the Russian Federation.

There are also special conditions- when there is a special relationship (for example, interdependence) between the payer and the recipient of the interest (or between both of them and another person) and the amount of interest paid exceeds the amount that would have been agreed upon between the payer and the recipient in the absence of such relationship. In this case, the excess portion of the payment is taxed in the state of which the interest payer is a resident.

OPINION PRACTICE
Roman OMELYANCHUK, Financial Manager:
- When paying interest, you must remember that there is a provision in the Tax Code of the Russian Federation about controlled debt. Therefore, loans must be issued from a legally third-party company.

EXPERT COMMENT
Olga MATTEYS, Director of the Audit Department of AKG "SV-Audit":
- Separately, problems that may arise when receiving a loan from a foreign founder should be discussed. The fact is that, in general, Article 269 of the Tax Code establishes special rules recognition of expenses in the form of interest on borrowed funds received from a person owning more than 20 percent authorized capital borrower. International treaties, as a rule, provide for taxation of such income only in the country of the recipient, however, in the case of special relations (including interdependence) between the parties, there are also reservations. The problem arises when determining the amount of interest that would be agreed upon by the parties in the absence of a special relationship. The agreements do not define the mechanism for determining this amount, and the Ministry of Finance especially emphasizes that the maximum amount of interest on which tax is not withheld should be determined according to the rules of paragraph 2 of Article 269 of the Tax Code of the Russian Federation. In this case, the identified “surplus” is subject to taxation according to the rules established for the taxation of dividends (letter of the Ministry of Finance of Russia dated July 29, 2005 No. 03-08-05).

Income received by a resident of the Russian Federation from the sale of movable property in Holland, Germany, Great Britain and Cyprus is taxed in Russia

DIVIDENDS OF A FOREIGN COMPANY

Dividends, for the purpose of avoiding double taxation, mean income from shares or other rights, other than debt claims, that provide for participation in profits. As well as income from other corporate rights. Dividends are taxed in the country of which the recipient is a resident. But at the same time, the agreements also allow for the taxation of dividends in the state of which the person paying them is a resident. The differences lie in the tax rate levied in the state in which the dividends are paid, as well as in the conditions under which such rates are applied.

Let us consider, in relation to each of the five agreements, the taxation procedure in the Russian Federation in a situation where a Russian company pays dividends to a foreign company. Let us immediately note: if the conditions specified below are not met, dividends are taxed in the state whose resident pays them, at the maximum rate allowed by the agreement.

A tax resident of Russia, obligated to pay tax in the Russian Federation on income from assets throughout the world, is considered to be someone who lives in the country for more than 183 days a year. In particular, many owners of foreign real estate fall under this definition, who can receive income from rental or sale of housing. If they are Russian tax residents, then a situation arises in which they must pay taxes both abroad (at the location of the object) and in Russia (at the place of their tax residence). However, the tax cannot be charged twice: it is paid only abroad, and the difference is counted in Russia. This is provided for by double taxation agreements.

Double taxation agreement - what is it?

A double tax treaty is a treaty concluded between two countries that sets out the rules by which taxes are levied on organizations and individuals in cases where the income-producing assets are not located in the country of residence of the recipient of the income.

The agreement on the avoidance of double taxation specifies the types of taxes that fall under the scope of the document, as well as the circle of persons to whom its rules apply. Also, such an agreement specifies the tax conditions, validity period and procedure for terminating the agreement. Russia has concluded double taxation agreements with 82 countries.

“As for, for example, income in Estonia or other countries with which Russia has not concluded an agreement to avoid double taxation, residents of the Russian Federation pay taxes twice, in both countries. If Estonian legislation provides for the collection of tax from a non-resident, then the amount paid will not be taken into account in the Russian Federation, since the actual amounts of tax paid on income received in a foreign country are not counted when paying tax in Russia, unless otherwise provided by the relevant international treaty signed by the Russian Federation “says Tranio lawyer Ekaterina Shabalina.

For buyers and owners of foreign real estate, agreements on the avoidance of double taxation are important primarily because they allow tax to be offset in Russia on rental income when selling such property.

How is tax taken into account when receiving rental income?

“If a Russian resident receives income from real estate located, for example, in Germany, the amount of tax paid in Germany will be deducted from the amount of tax payable in Russia. The tax amount is calculated according to Russian tax law (at a rate of 13% and established rules) and is deducted from the amount paid foreign tax. It should be remembered that the deduction cannot exceed the amount of tax calculated in Russia. Accordingly, if the amount of tax in the state of the source of income was paid in a smaller amount than was calculated in Russia, then the missing part will have to be paid in the Russian Federation,” explains Ekaterina Shabalina.

If you receive rental income, you must independently declare it in Russia by submitting a declaration in form 3-NDFL (sheet “B”, or income from sources outside the Russian Federation) to the tax authority at your place of residence.

Attached to the tax return:

• issued to foreign tax documents, confirming the amount of income received and the tax paid on it, as well as their notarized translation into Russian. These documents must reflect the type of income, its amount, the calendar year in which the income was received, the amount of tax and the date of its payment.
• or a copy of a tax return filed abroad with a copy payment document about payment of tax (all this must also be translated into Russian and notarized).

“The amount of tax paid abroad is credited only after filing this declaration, at the end of the tax period. You can declare income and receive a tax credit within three years after the end of the reporting year in which the income was received,” says Ekaterina Shabalina.

For example, a Russian tax resident owns German real estate, which brings in 10 thousand euros per year as rental income. Sum income tax in Germany it will be 2,324 euros (the rate is 23.24% of rental income, taking into account the surcharge to support solidarity), in Russia - 1,300 euros (13%). Since the amount of 1,300 euros is less than 2,324, the property owner will not have to pay anything additional in the Russian Federation.

At the same time, deductions received abroad are not taken into account when calculating the taxable amount in Russia. Let’s say a Russian rents out a house in France and receives 18 thousand euros per year. According to French law, he has the right to deduct 50% from the taxable amount due to housing costs. Therefore, 9 thousand euros are subject to tax on rental income. Minimum bid for non-residents - 20%. This means that a Russian pays tax in the amount of 1,800 euros per year. Since Russia does not have a similar system of deductions when paying taxes, you would have to pay the full amount of 18 thousand euros at a rate of 13%, that is, 2,340 euros per year. But since there is an agreement between Russia and France to avoid double taxation, a Russian needs to pay tax in France, and in the Russian Federation only pay the difference - 540 euros.

It is also important to know that when paying tax in Russia under a simplified taxation scheme, you cannot receive a foreign tax credit, and in this case the taxation will be double.

How is tax taken into account when selling foreign real estate?

According to the Federal Tax Service letter No. ED-3-3/4062@ dated November 9, 2012, the legislation of the Russian Federation does not distinguish between the sale of real estate in Russia and abroad - the same rules apply in both cases.

According to Ekaterina Shabalina, income received from the sale of foreign real estate is not subject to taxation, and the seller is not required to file a tax return in Russia in two cases:

• for properties purchased before January 1, 2016: if real estate is being sold that has been owned for more than three years;
• for objects purchased after January 1, 2016: if real estate is being sold that has been owned for more than five years (general case) or three years (if the taxpayer received the object by inheritance or as a gift from a relative or family member, under a lifelong dependency agreement) .

Tax exemption can be obtained if the property is not used for business activities. The definition of entrepreneurial activity was given by the Federal Tax Service in letter No. ED-3-3/412@ dated February 8, 2013.

If the seller does not fall under the above conditions, then he needs to submit a tax return in Form 3-NDFL by April 30 of the year following the year the income was received, and pay the tax by July 15.

Like tax on rental income, tax on sales income can be credited in Russia as part of the elimination of double taxation. For Russian residents the rate is 13%.

For example, in 2010, a Russian resident decided to buy an apartment in Spain for 500 thousand euros, and in 2016 he sold it for 550 thousand. Capital gains - 50 thousand euros - are subject to Spanish tax at a rate of 24%. The tax amount in this case is 12 thousand euros. Since more than three years passed between the purchase and sale, according to Russian legislation, you don’t need to file a declaration in the Russian Federation, just pay tax in Spain.

It is important to remember that tax evasion is a criminal offense. Paying taxes abroad at a lower rate than in Russia, and not filling out a tax return at home, is illegal.

Yulia Kozhevnikova, Tranio

International agreements for the avoidance of double taxation- international agreements concluded between states in order to eliminate double taxation of income and property of citizens and organizations - once in one state and again in another.

Example

Russian organization pays dividends to a foreign organization. tax code Russia establishes that when paying dividends, a Russian organization, as a tax agent, must withhold and transfer tax to the budget at a rate of 15%.

The foreign country may also provide that dividends are subject to tax. In this case, tax on the dividend amount will be paid twice - once in Russia and a second time in a foreign country.

International agreements determine in which state the tax must be paid and in what amount.

The term Agreement (convention, treaty) on the avoidance of double taxation in English - Agreement (convention, treaty) for the avoidance of double taxation.

A comment

Russia has concluded agreements with many foreign countries on the avoidance of double taxation, which exclude double taxation of the same income or property in Russia and in a foreign country and determine in what amount and in which country the tax must be paid. There are many such agreements and they can be called an agreement, a convention, a treaty. In terms of the number of concluded international agreements on the avoidance of double taxation, Russia is one of the leaders, entering the TOP 5 countries.

Agreements have been concluded with most states. The Russian Federation does not enter into Agreements with so-called offshore states. The list of agreements is constantly updated.

Part 4 of Article 15 of the Constitution of the Russian Federation determines that the generally recognized principles and norms of international law and international treaties of the Russian Federation are integral part her legal system. If an international treaty of the Russian Federation establishes rules other than those provided for by law, then the rules of the international treaty apply.

Accordingly, double taxation agreements concluded by Russia with a foreign state have a higher legal force than the Tax Code of the Russian Federation. As a result, if Russian persons (legal or individual) receive income from activities in another state or foreign persons receive income in Russia, then the rules of the agreement must be applied.

The same rule is repeated in Art. 7 of the Tax Code of the Russian Federation: “If an international treaty of the Russian Federation establishes rules and norms other than those provided for by this Code and normative legal acts adopted in accordance with it, the rules and norms of international treaties of the Russian Federation are applied.”

Example

A Russian organization pays dividends to an organization from Germany. The Russian Tax Code determines that dividends paid to foreign organizations must be taxed at a rate of 15%. The Russian organization paying dividends is obliged to withhold and transfer to Russian budget tax amount.

Russia entered into an Agreement with Germany dated May 29, 1996 “On the avoidance of double taxation with respect to taxes on income and property.” Article 10 “Dividends” of the agreement defines:

"1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in the Contracting State of which the company paying the dividends is a resident in accordance with its laws. The tax, however, should not exceed:

a) five percent of the gross amount of the dividends, if the beneficial owner thereof is a company which directly holds at least ten percent of the authorized or share capital of the company paying the dividends and this share in the capital is not less than EUR 80,000, or the equivalent amount in rubles;

b) fifteen percent of the gross amount of dividends in all other cases."

Accordingly, if a German company owns 10% or more of the authorized or share capital of a Russian organization (paying dividends), and this share is not less than 80,000 euros or the equivalent amount in rubles, then a tax rate of 5% is applied.

Reduced tax rates and exemptions

In the case of payments by Russian organizations to foreign organizations of the so-called passive income(dividends, interest, royalties), Russian organizations act as tax agents and are obliged to withhold and transfer tax to the budget at the rates provided for by the Tax Code of the Russian Federation. International agreements often provide for reduced tax rates or even exemptions in this case.

To apply this benefit, a foreign organization must, before paying income, provide the Russian tax agent with confirmation that this foreign organization has a permanent location in the state with which the Russian Federation has an international treaty (agreement) governing tax issues. This confirmation must be certified by the competent authority of the foreign state. If this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian (Article 312 of the Tax Code of the Russian Federation).

Important legal precedent

Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated May 29, 2007 N 1646/07 in case N A40-5091/06-33-49

The decision is in favor of the taxpayer.

The Russian taxpayer paid income in 2002-2003 to a foreign organization established in Cyprus. The Russian organization had confirmation of the location of the foreign organization in Cyprus dated May 25, 1999 and May 27, 2004. The tax authority imposed a fine on a Russian tax agent due to the fact that, in the opinion of tax authority, he was not entitled to apply a preferential tax rate under an international agreement, since on the date of payment of income there was no confirmation of the location of the foreign organization.

The Supreme Arbitration Court of the Russian Federation decided in favor of the taxpayer, considering that the presence of confirmations in 1999 and 2004 is sufficient to confirm the location of a foreign organization in 2002 - 2003.

Double taxation agreements define the following main provisions::

The provision that the Agreement applies to persons who are residents of one or both Contracting States.

Definition of Agreement Terms

List of taxes to which the agreement applies. As a rule, these are direct taxes - profit tax, income tax, property tax. Indirect taxes(VAT, excise taxes, sales tax) are not the subject of such agreements and are levied by each state according to its own rules.

How is the tax residence of a person determined (for example, a person is a tax resident of Russia or a foreign country). In most cases, there are no difficulties with tax residency, but there are also difficult cases.

The concept of “Permanent establishment” is defined. This concept is important because if a foreign organization operates in Russia through a permanent representative office, then it is recognized as a payer of income tax on profits received by the representative office in Russia. Moreover, the term “Permanent Representative Office” does not depend on the official registration of a foreign organization. For example, many agreements provide that construction site or installation facility are a permanent establishment only if the duration of their activities exceeds a certain period (for example, 12 months). Accordingly, if a construction site exists in Russia for 13 months, then the activity is considered as a permanent establishment.

Procedural issues.

For each type of income and property, it is determined in which country the income (profit, property) will be taxed and at what rate. As a rule, there are:

Income from real estate

Profit from business activities

Revenues from international sea and air transport

Income from alienation of property

Income from independent personal services

Income from employment

Remunerations for members of supervisory boards and boards of directors

Income from the activities of artists and athletes

Income from activities within the public service

Teachers, students and other learners

Other income

Property

The inadmissibility of tax discrimination is indicated. For example - Nationals of a Contracting State may not be subjected in the other Contracting State to any taxation or any requirement connected therewith that is different or more burdensome than the taxation or related requirements to which nationals of that other State in the same circumstances are or may be subjected. This provision also applies to all legal entities, simple partnerships and other associations of persons established in accordance with the legislation in force in one of the Contracting States.

Procedure for eliminating double taxation. In Russia, for Russian organizations and individuals, double taxation is eliminated, as a rule, by offsetting in Russia tax paid abroad - if a resident of the Russian Federation receives income or owns property that, in accordance with the provisions of the Agreement, may be taxed in a Foreign country , the amount of tax on such income or property paid in the Foreign State will be deducted from the tax levied on such person in the Russian Federation. Such deduction, however, cannot exceed the amount of tax calculated on such income or property in accordance with the laws and regulations of the Russian Federation.

Example

The Russian organization received a profit of 100 thousand euros from the activities of its branch in a foreign country. In a foreign country, this profit was subject to income tax at a rate of 30%. The tax amount was 30 thousand euros.

In Russia, profits from such activities are subject to income tax at a rate of 20%. Considering that the tax amount was Russian rules less than according to the rules of a foreign state, as a result of the offset, no tax is paid on the profits of a foreign branch in Russia.

The Tax Code of the Russian Federation establishes the requirement that when applying the provisions of international treaties of the Russian Federation, a foreign person must provide the tax agent paying the income with confirmation that this foreign person has a permanent location in the state with which the Russian Federation has an international treaty (agreement) regulating issues taxation, which must be certified by the competent authority of the relevant foreign state. If this confirmation is drawn up in a foreign language, the tax agent is also provided with a translation into Russian (Articles 312, 232 of the Tax Code of the Russian Federation).

Entry into force of the international treaty for the avoidance of double taxation

The date of entry into force of an international treaty for the avoidance of double taxation is determined in the treaty itself.

The entry into force is preceded by the so-called ratification international treaty. Ratification is, in essence, the adoption of an international treaty by the State Duma of Russia and is carried out in the form of a federal law (Article 14 of the Federal Law of July 15, 1995 N 101-FZ “On International Treaties of the Russian Federation”).

After the adoption of the ratifying federal law, the President of the Russian Federation signs the instrument of ratification.

Then, Russia and a foreign state exchange instruments of ratification in accordance with Art. 19 Federal Law dated July 15, 1995 N 101-FZ.

Example

Article 27 “Entry into force” of the Agreement between the Government of the Russian Federation and the Government of Australia dated 09/07/2000 “On the avoidance of double taxation and the prevention of tax evasion in relation to income taxes” determines:

"The Contracting States shall notify each other in writing through diplomatic channels that they have completed the appropriate procedures required for the entry into force of this Agreement. This The agreement comes into force on the date of the last notification, and the provisions of this Agreement apply:

(a) in Australia:

(i) in respect of withholding tax on income received by a non-resident, on income received on or after 1 July of the calendar year next following the year in which this Agreement enters into force;

(ii) in respect of other Australian tax, to income or profits for any financial year beginning on or after 1 July of the calendar year next following the year in which this Agreement enters into force;

(b) in Russia:

in a relationship tax years and periods beginning on or after January 1 of the calendar year next following the year in which this Agreement enters into force."

Model convention

The OECD has developed the so-called OECD Model Convention - a template for an international agreement on the avoidance of double taxation. This document is used by many states as the basis for developing their agreements. The Model Convention was first published in 1963 and updated in 1977.

In turn, the UN also developed a model convention (UN Model Convention) for agreements between developed and developing countries. The UN Model Convention was first published in 1980 and was later updated several times (2001, 2011, 2012). It is believed that the UN Model Convention takes more into account the interests of developing countries(compared to the OECD convention), as it provides more tax rights states that receive business investment from foreign countries.

Historical reference

In the 1920s, the League of Nations recognized that interaction tax systems states can lead to double taxation - a situation where the same income (profit, property) is taxed twice - in one state and in another. It was decided to eliminate double taxation by adopting agreed international rules taxation. This is how international agreements for the avoidance of double taxation emerged.

Double taxation agreements between Russia and foreign countries