Key Changes in the Russian Tax Code as of 2024

The Russian tax code underwent significant changes as a result of the amending law of November 27, 2023. These amendments introduce taxes on previously exempt items, such as payments for services and transfer pricing adjustments, as well as certain exemptions – notably, interest on bank loans. They also adjust existing regulations. This note aims to summarize and analyze these changes for better understanding of its consequences.



Withholding Tax on Cross-Border Payments to Related Parties:

As of 2024, a new 15% withholding tax applies to payments for services to related non-Russian parties. In principle, the tax is mitigated by a double tax treaty. However, considering the suspension of a significant number of Russian DTTs, this remedy may not always be available.



Exemptions from Russian Withholding Tax:

To the contrary, certain payments have been exempted from Russian Withholding Tax:

• Interest on Bank Loans and Credit Agencies is exempt from WHT if the relevant agreement was concluded prior to August 8, 2023, provided the lender is an unrelated party.
• In some instances, the outcome may be even more beneficial than prior to suspension of Double Tax Treaties. For example, in case of banking loans from residents of countries without favourable double tax treaties with Russia – such as the Netherlands, Bahrain, UAE, etc.
• A similar exemption was introduced for literature royalties, works of art, and science, provided the parties involved are not related, as well as for royalties for audiovisual content distributed through (cable) TV Channels.

These exemptions are set to apply retroactively from August 8, 2023, until December 31, 2025.



Transfer Pricing:

As of 2024, an excessive payment abroad by a Russian party or underpayment to the Russian recipient by their foreign counterpart is treated as a recharacterized dividend and is taxed accordingly under the domestic rate of 15%. Additionally, penalties for various transfer pricing non-compliance issues have been significantly increased, in some instances by tenfold. For example, non-submission of global or local documentation is subject to a RUR 1 million penalty, which is approximately equivalent to EUR 10,000.

For any additional inquiries or information on this topic, please don't hesitate to contact Krešimir Lipovšćak, Partner at Crowe Croatia, and Roustam Vakhitov, Associated International Tax Partner at Crowe Kazakhstan.

This article represents a collaborative effort between Crowe Croatia and Crowe Kazakhstan.