National Settlement Depository (NSD) informs that the Russian Ministry of Finance’s Letter No. 03-00-РЗ/16236 dated 9 April 2014 on the application of double taxation treaties (DTT) for the purpose of using tax privileges was published in the ‘NSD Acting as a Withholding Agent’ section of NSD’s web site on 28 April 2014. According to the Letter, tax privileges provided for by DTTs apply to foreign residents who are beneficial owners of income.
According to the Letter, when applying a DTT, one has to bear in mind that the term “beneficial owner of income” is used not in a narrow, technical, sense, but has to be interpreted based on the purpose and objectives of the DTT (such as prevention of double taxation or tax evasion) and in accordance with the key contract principles (such as prevention of abuse of contract and ‘substance over the form’ principle). Though the direct recipient of income can be treated as a resident, but this is not a sufficient reason to treat such recipient, by default, as a beneficial owner of such income in the state of residence.
The Letter also contains examples of conduit transactions to which tax privileges provided for by DTTs do not apply.