🇷🇺Suspension of Tax Treaties by Russia: Consequences

Context: treaty network before 2023

By the early 2020s, Russia was party to approximately eighty tax treaties—a dense network built since the mid-1990s. Under any such treaty, two states share the right to tax the same income and limit withholding tax at source. Under treaties, dividends were typically taxed at 5–10% instead of the domestic 15%, interest and royalties often fell to 0–10%, and residents received credit for tax paid abroad. This is precisely what made classic holding chains through Cyprus, the Netherlands, and Luxembourg low-cost and predictable.

The network began changing even before 2023. In 2020–2021, the Ministry of Finance revised treaties with Cyprus, Malta, and Luxembourg, raising the rate on dividends and interest to 15% and closing the most aggressive profit extraction schemes. After the events of 2022, the approach pivoted: instead of targeted treaty amendments, the state moved to freeze them with respect to countries Russia classified as unfriendly. The culmination was Decree No. 585.

Concept

On August 8, 2023, by Presidential Decree No. 585, Russia unilaterally suspended the key provisions of double tax treaties (DTTs) with 38 "unfriendly" states—including the USA, EU countries, the United Kingdom, Japan, and Korea. Legally, the treaties remain in force, but their operative articles ceased to apply.

DTTs are intended to allocate the right to tax the same income between two countries and prevent it from being taxed twice. The decree suspended precisely these mechanisms.

Short answer. Presidential Decree No. 585 of 8 August 2023 suspended — but did not denounce — key articles of Russia's double tax treaties with 38 "unfriendly" countries, and the distinction is the whole doctrine: the distributive articles (reduced withholding on dividends, interest, royalties) are frozen, while the treaties themselves live on — exchange of information, mutual agreement procedure, residence tie-breakers survive, while the foreign-tax credit splits in two: for companies it is unilateral (Article 311(3) of the Tax Code), for an individual it exists only where the treaty itself provides it (Article 232(1)).

Counterparties answered asymmetrically: the United States mirrored the suspension from 16 August 2024, France and Czechia confirmed reciprocal suspension by diplomatic note, and the United Kingdom and Germany went further and suspended their treaties in full — the 1994 Convention ceased to have effect in the UK from 1 April 2025 for corporation tax and from 6 April 2025 for income tax and capital gains tax (the Double Taxation Relief (Russian Federation) (Revocation) Order 2025, SI 2025/344), and Germany notified Russia on 30 June 2026 that the Agreement of 29 May 1996 is suspended with effect from 1 January 2027; Canada (from 18 November 2024), Sweden (from 1 February 2025) and Finland (from 1 July 2026) likewise suspended their treaties in full. The Denmark convention was denounced by Denmark itself and the Latvia treaty by Russia — both ceased to have effect on 1 January 2024 — and Lithuania terminated its agreement with effect from 1 January 2026. In all these pairs the procedural articles — exchange of information, the mutual agreement procedure, the tie-breakers, the credit article — are gone as well.

Treaties with states outside the Decree 585 list — Hong Kong among them — apply unchanged, while Singapore is on the list (item 36). The UAE is not on the Decree 585 list, so the suspension does not reach it: the new Agreement between the Government of the Russian Federation and the Government of the United Arab Emirates for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax Avoidance and Evasion of 17 February 2025 (ratified by Federal Law No. 189-FZ of 7 July 2025, in force since 18 July 2025) applies in full from 1 January 2026, so its 10% cap on dividends, interest and royalties is applied in practice.

Flows to listed jurisdictions lost treaty relief and fall back to full domestic withholding; routes through non-suspended partners keep relief but must pass beneficial-ownership and substance scrutiny. Country-specific treaty statuses change rapidly — verify the current pair status before each payment.

How it came to suspension

After February 2022, the European Union and individual states wound down tax dialogue with Moscow, and on February 14, 2023, the EU Council added Russia to its list of non-cooperative jurisdictions—formally for failure to meet commitments on the international holding company regime and cessation of dialogue on tax matters. For Brussels, this meant Russia was no longer considered a good-faith partner in exchanging and coordinating tax rules.

Moscow responded symmetrically. In spring 2023, the Ministry of Finance and Ministry of Foreign Affairs jointly proposed suspending the application of DTTs with states that had imposed unilateral restrictions against Russia, and on August 8 this was formalized by Decree No. 585. Legally, a soft instrument was chosen—suspension. Unlike denunciation, treaties remain in the international legal sphere and can apply again once political relations normalize.

What was suspended

The suspension covered articles that allocated taxing rights and provided reduced withholding tax rates—on dividends, interest, royalties, and capital gains. The list varies for each treaty: for example, under the agreement with the USA, paragraph 4 of Article 1 and Articles 5-21 and 23 were suspended. Only certain procedural provisions such as information exchange and mutual agreement procedures survived.

The set of treaties is fixed by the decree itself: all 38 agreements are listed by name in its Article 1, and the decree makes no reference to Government Order No. 430-r of 5 March 2022. These are two different lists and they do not fully coincide: the register of unfriendly states under Order No. 430-r also covers countries whose treaties are absent from the decree — Latvia, Estonia, Ukraine, Monaco, the Bahamas. Availability of a treaty rate at source is therefore checked against Article 1 of Decree No. 585, not against the Order No. 430-r register; conflating the two lists is a standard routing error.

Consequences for payments from Russia

The practical effect was immediate: payments from Russia to residents of unfriendly countries from August 8, 2023, are subject to withholding tax at Russian Tax Code rates, without treaty benefits. The rate depends on who receives the payment and what kind of income it is.

The former treaty rates of 5% or 0% no longer apply. The official reference point for each treaty is the Russian Ministry of Finance status table, "Information on the status of double tax treaties", latest revision as at 14 July 2026, which records for every country which articles are suspended and whether the partner has confirmed a reciprocal step. The table sets out the Russian side of the question, so steps by partners whose treaties have ceased to apply entirely have to be checked against their own instruments: for the United Kingdom, the Double Taxation Relief (Russian Federation) (Revocation) Order 2025 (SI 2025/344); for Germany, the Federal Ministry of Finance statement of 9 July 2026.

The suspension reaches payments made on or after 8 August 2023 — anything paid earlier is untouched. The temporary reliefs of Federal Law No. 539-FZ of 27 November 2023 — preserving the source exemption for income that was untaxed under the treaties before the decree (Article 310(2)(11) of the Tax Code) — had not expired by 2026: as amended by Federal Law No. 425-FZ of 28 November 2025, the exemption for interest paid to independent foreign export-credit agencies and banks under contracts concluded before 8 August 2023 runs to 1 January 2036, and the exemption for aircraft leasing, broadcasting rights, royalties and international carriage to 1 January 2029.

These reliefs never extended to dividends paid to private owners — there the 15% rate applied from the outset. The suspension is only one of the sanctions mechanisms that affect the same payments in different ways; their combined effect is set out in the map of the sanctions cluster.

What the tax agent must confirm before payment

Entitlement to a reduced rate under a live treaty is established before the payment, not after it. Article 312 of the Tax Code requires the foreign recipient to give the tax agent, in advance, a certificate of tax residence in the treaty country and confirmation of beneficial ownership of the income. Without those documents the agent withholds at the domestic rate, and recovering the overpayment becomes a separate and slow procedure. Incorporation in a treaty country is not by itself enough: an intermediate vehicle with no staff, functions or risks creates no entitlement.

Where relief is unavailable at the level of the intermediate company, the look-through approach remains — Article 7(4) of the Tax Code: tax is computed as though the income had been received directly by the person beneficially entitled to it, and that person's treaty applies. For a Russian owner who closes the chain on himself this usually means the non-resident individual rate — the same 15% on dividends — while CFC rules arise in parallel on the foreign company itself. The look-through approach delivers a real saving only where the ultimate recipient is resident in a friendly jurisdiction with a treaty still in force.

A separate exposure is transfer-pricing adjustment. If the price in a transaction between related parties departs from the market level and the tax authority adjusts the base, the amount of the adjustment in favour of the non-resident is treated as a dividend and taxed accordingly. Intra-group loans, royalties and service fees are therefore built on an arm's length basis: an under- or over-stated price results in a taxable dividend, at a rate the treaty no longer reduces.

Mirror response and the US case

Partners responded symmetrically. In the case of the USA, the Treasury suspended the same articles of the treaty and Protocol from August 16, 2024 (Announcement 2024-26), and US treaty benefits no longer apply. This created a rare case of mutual suspension: both states simultaneously withdrew mutual tax concessions.

Response from other partners

The symmetry with the USA was not unique. Some countries confirmed a reciprocal suspension of the same articles; in other cases the treaty ceased to apply in full by the partner's or Russia's decision.

In the British, Canadian, Swedish and Finnish pairs, and from 2027 in the German one, the whole treaty does not apply, not merely the distributive block: exchange of information, the mutual agreement procedure, the residence tie-breakers and the article on elimination of double taxation do not survive either. Practice varies: in some cases application of the same articles suspended by Russia is suspended, in others the treaty is terminated entirely, and in still others the partner has not formally expressed its position. Tax agents must verify the status for each country separately.

Double taxation for Russian residents

For a Russian resident receiving income abroad, the risk is reversed—double taxation. The suspension affected the distributive articles of treaties, but the article on elimination of double taxation was generally left in force. In the US pair both sides froze the identical list — paragraph 4 of Article 1, Articles 5–21 and 23 of the 1992 treaty and its accompanying Protocol (Decree No. 585; on the US side Announcement 2024-26, from 16 August 2024) — and Article 22 on relief from double taxation is not on that list.

But calling the result a domestic credit is accurate only for companies. Article 311(3) of the Tax Code credits tax paid by a Russian organisation under the law of a foreign state without any reference to a treaty — a genuinely unilateral rule. For individuals the provision takes the opposite approach: under Article 232(1) of the Tax Code amounts actually paid abroad "are not credited against tax payable in the Russian Federation unless the relevant international tax treaty of the Russian Federation provides otherwise". It is the treaty, not the Code, that creates an individual's right to a credit, so suspension of the article on the elimination of double taxation also ends the credit.

Dividends are the one carve-out: Article 214(2) of the Tax Code asks only that a treaty has been concluded with the source state, and suspension does not terminate a treaty.

On other income in the US pair the answer is contested: Article 22 formally remains in force, but paragraph 4 of Article 1 is suspended, and that paragraph was precisely what carved Article 22 out of the saving clause in paragraph 3 of Article 1; EY interprets this as ending the right to a treaty credit, and as at August 2026 there is no official Ministry of Finance or Federal Tax Service guidance either way.

The credit is claimed on a return within three years (Article 232(2)) and only against the supporting documents required by Article 232(3). But credit does not cover all situations: abroad, the withholding rate returns to the high domestic rate (in the USA—30%), and credit is limited to the amount of Russian tax on the same income and does not refund overpayment if the foreign rate is higher. Where the treaty previously simply eliminated withholding tax at source, a cash gap and actual double taxation now arise. The specific calculation depends on the type of income and country and requires individual verification.

Consequences for private structures

Classic cross-border structures face the greatest consequences. Dividends that flowed from a Russian company to an EU or UK holding at a rate of 5 or 10 percent are now subject to full 15 percent withholding without refund. Interest on intra-group loans and royalties for licenses, previously often reduced to 0–5 percent, are now taxed at 25 percent — 20 percent for payments made before 1 January 2025. Capital gains from the sale of shares in companies whose assets consist predominantly of Russian real estate also lose treaty protection. An intermediate holding that existed for treaty benefits becomes a redundant link: for family holdings, the former ownership structure with a European intermediate company became more expensive, and the owner must recalculate whether it is justified.

For individuals, the logic is similar. A Russian resident with dividends on US stocks or rental income in Europe faces increased tax abroad and limited credit at home; the choice then comes down to transferring the asset, changing the ownership structure, or reconsidering one's own tax residency.

Responses take several forms. Some transfer the intermediate holding to friendly jurisdictions—UAE, Hong Kong, Kazakhstan—or redomicile the company to Russian Special Administrative Regions (SARs) with their reduced regime for international companies; passive flows are redirected through jurisdictions where the treaty remains in effect. Some change personal tax residency, calculating exit taxes and consequences of relocation from Russia in advance. At the same time, any such structure must withstand the substance test, and CFC rules remain: changing the holding's jurisdiction does not relieve the Russian beneficiary of the obligation to report a controlled foreign company—otherwise additional assessments arise in place of savings.

Provisions That Remain Applicable

The suspension under Decree No. 585 affected distributive and rate articles, but not the entire treaty. Outside the scope of suspension remain provisions on exchange of tax information, mutual agreement procedure, determination of residence, and—formally—on elimination of double taxation. This holds for pairs where the partner either has not expressed its position or has reciprocally suspended the same articles. Where the treaty has ceased to apply in full, the procedural provisions also cease to apply — Denmark and Latvia (treaties terminated on 1 January 2024), Lithuania (terminated from 1 January 2026), Canada, Sweden and the United Kingdom (suspended in full from 18 November 2024, 1 February 2025 and April 2025 respectively), Finland (from 1 July 2026) and Germany (Agreement suspended in full from 1 January 2027). The legal framework for information interaction is preserved, although practical exchange with a number of countries is hampered; the status of automatic exchange under CRS should be checked for each jurisdiction separately.

Before each cross-border payment, tax agents should verify four points—whether the treaty is in effect at all, whether the country is on the list of Decree No. 585, which specific articles are suspended in the particular treaty, and whether the partner has confirmed a reciprocal step. The first question has stopped being a formality: there are no treaties with Denmark or Latvia from 1 January 2024 or with Lithuania from 1 January 2026; the treaties with Canada, Sweden and Finland are suspended in full from 18 November 2024, 1 February 2025 and 1 July 2026 respectively; the 1994 Convention with the United Kingdom has no effect for the financial year beginning 1 April 2025 for corporation tax and for the 2025-26 tax year, beginning 6 April 2025, for income tax and capital gains tax (the Double Taxation Relief (Russian Federation) (Revocation) Order 2025, SI 2025/344, made 12 March 2025); and the Agreement of 29 May 1996 with Germany is suspended in full from 1 January 2027 (notification of 30 June 2026, Federal Ministry of Finance statement of 9 July 2026). A general list is insufficient to determine the treatment of a particular payment.

Development of the Treaty Network

First, the suspension was formalized by decree, then enshrined in law: Federal Law No. 598-FZ of December 19, 2023, moved the decision from the plane of a presidential act to the plane of law. The regime operates indefinitely—until relations normalize, and a quick return to former rates is not expected.

In parallel, Russia is building out its treaty network toward friendly jurisdictions. A telling example is the new agreement with the UAE — the Agreement between the Government of the Russian Federation and the Government of the United Arab Emirates for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax Avoidance and Evasion, signed on 17 February 2025, ratified by Federal Law No. 189-FZ of 7 July 2025 and in force since 18 July 2025. The UAE appears neither on the Decree 585 list nor on the register of unfriendly states (Government Order No. 430-r), so the suspension regime does not extend to this treaty: it applies in full, not in part.

Under its Article 31 the treaty applies to both groups of taxes from the same date — taxes withheld at source, for amounts paid or credited on or after 1 January 2026; other taxes on income and on capital, for tax periods beginning on or after 1 January 2026 (Russian Ministry of Finance information notice of 3 December 2025). Withholding is capped at 10% on dividends (Art. 10), interest (Art. 11) and royalties (Art. 12) where the recipient is the beneficial owner, with a full exemption for payments to the other Contracting State and its financial and investment institutions.

The earlier agreement of 7 December 2011, which covered only the investment income of the two states and their financial institutions, ceases to have effect from the date the new one begins to apply. This is the first full-fledged tax treaty between the countries, covering both business and individuals, and it provides a model for future agreements: after the UAE, Russia is negotiating with other friendly partners in the Gulf and Asia, and the geography of taxation of Russian capital is shifting toward the Gulf, Asia, and neutral countries.

Jurisdictions for Passive Payments

For the following six jurisdictions, treaty application with Russia is not suspended. Treaty status is checked against the Russian Ministry of Finance status table; the rate comes from Articles 10 to 12 of the particular agreement.

Rates are published for two of the six jurisdictions and are compared by type of payment. For dividends, the rate under the Hong Kong agreement is half that under the UAE agreement — 5% against 10% — but only on a direct holding of at least 15% of the payer's capital and only for a company, not a partnership; a minority stake pays the same 10%. For interest, the rate difference is substantial: the Hong Kong agreement leaves Russia no taxing right at all, the UAE treaty caps it at 10%, and the domestic rate with no treaty would be 25%. Royalties follow the same order: 3% against 10%, against the same domestic 25%. The rate difference therefore makes Hong Kong more advantageous for licence and interest flows, and for dividend flows only where the stake is large.

The applicable rate does not determine the choice of jurisdiction. A reduced rate applies only to a recipient who has given the tax agent a residence certificate and confirmation of beneficial ownership before the payment (Article 312 of the Tax Code), and an intermediate company that exists only formally in Dubai or Hong Kong creates no entitlement any more than a Cypriot one did. Two further considerations apply: CFC rules on the foreign company itself, and whether the receiving bank will accept a payment from Russia at all — the comparison of rates and treaty networks is set out in the material on withholding tax.

Information exchange is also narrowing: automatic exchange (CRS/AEOI) with a number of unfriendly countries has been curtailed, so transparency in those directions is falling simultaneously with the disappearance of benefits. Where a treaty still operates, protection remains conditional on anti-abuse rules—MLI and treaty shopping. The cost of cross-border passive flows to unfriendly countries has risen structurally, and planning is shifting to friendly hubs and domestic regimes like SARs. Structures should be planned on the assumption that the current regime will remain in place for the long term.

Check each payment chain for an active treaty, recalculate withholding tax at domestic rates, and assess whether credit is preserved for your country. Where application of a treaty is suspended—solutions are sought through redomiciliation to SARs, friendly jurisdictions, or change of residency.