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Ministry of Finance issues clarification on Russia-France double tax treaty

Russia

Russian Permanent Establishments and subsidiaries of French legal entities are eligible to deduct all their costs incurred with respect to their industrial and commercial activities. Taxand Russia discuss the finer details of the Russia-France double tax treaty and how it affects multinationals in these jurisdictions.

The above provision is applicable to a permanent establishment or a company or other entity that pays taxes and is a Russian resident, provided:

  • At least 30% of the Russian company's authorised capital is held by one or more French residents;
  • Total Russian company's authorised capital amounts to at least FRF500,000 or its equivalent in another currency.

The amount is equal to EUR76,220 at the official rate of the European Central Bank.

 

Taxand's Take

To benefit from the tax treaty provisions a Russian subsidiary of a resident in a tax treaty country would need to perform a 3 step analysis to identify:

1. Whether the relevant tax treaty contains a clause on full deductibility of all or specific expenses;
2. If such a clause exists, whether the subsidiary qualifies for its application;
3. If the subsidiary qualifies for such a full deductibility, it needs to check whether it uses all available benefits.

Your Taxand contact for further queries is:
Andrey Tereschenko
T. +495 967 00 07
E. a.tereschenko@pgplaw.ru

Download the full tax alert from Taxand Russia here

Taxand's Take Author