Recent significant changes in tax legislation
On 30 April 2020, Russia notified OECD that it had completed its national procedures for implementing the Multilateral Convention (MLI) for 27 double tax treaties. So MLI may become effective as early as 1 January 2021. Treaty benefits will only apply if MLI criteria (including passing the principal purpose test) are satisfied.
Russia has launched revision of the withholding income tax rates on dividends and interest in a number of treaties with the aim to increase them up to 15% with the effective date as of 1 January 2021. Negotiations have already been initiated with Cyprus, Malta, Luxembourg and the Netherlands.
As of 1 April 2020 and going forward reduced social contributions rates (around 15%) for Small and Middle Enterprises (SMEs) have been introduced.
As of 1 January 2021 significant tax benefits (reduced 3% corporate income tax rate and reduced social contributions to 7.6%) have been provided to Russian IT and technology companies. To apply the benefits such companies need to obtain special accreditation, employ at least seven people and generate at least 90% of their total revenues from the core activity. At the same time, VAT exemption applicable to software and database transfers will be narrowed and all foreign supplies should likely be subject to a 20% VAT rate.