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New Information Exchange Obligations under DTT


On 19 September 2011, the Finance Ministry issued letter No 3-08-07/1 in which it announced new information exchange obligations with regard to the Double Tax Treaties (DDT) between Russia and Germany and Russia and Czech Republic. Taxand Russia looks at what this means for companies trading between Russia and Germany or Czech Republic.

The Finance Ministry made a decision, with regard to the German DTT (29.05.1996 with amendments on 15.10.2007) and Czech Republic DTT (17.11.1995 with amendments on 27.04.2007 forced 17.04.2009) that foreign tax authorities are able to make an official request to the Russian tax authority about information that is held confidentially by a bank. Moreover, if the Russian tax authority does not hold useful information it must make a request to the commercial banks for this information.

This exchange of information may prove to be uncomfortable for legal entities and self-employed entrepreneurs but it is legitimate. At present, the exchange of information containing the personal data of a natural person is not legal, therefore the Finance Ministry's letter should not be applicable to banks. A taxpayer who is a natural person will have the right to claim for protection of their rights.

Taxand's Take

The consequences of the obligations issued in the Finance Ministry's letter could be very uncomfortable and risky for Russian and foreign taxpayers, which have any connections with Russian banks. However, this letter may not have any legal consequences for an everyday person eg natural person, because the personal information of these entities cannot be exchanged without their agreement and is prohibited under Russian legislation.

Your Taxand contact for further queries are:
Andrey Tereschenko
T. +7 495 967 00 07

Ivan Zelenin
T. +7 495 967 00 07

Taxand's Take Author