Russia has ratified the treaties on avoidance of double taxation with Argentina and Latvia as well as a Protocol to the treaty on avoidance of double taxation with Switzerland (the “Protocol”). To date, these treaties and the Protocol have not come into force; further enactment procedures need to be complied with by the respective states.
Amendments to the Russian-Swiss treaty are of most interest. According to the explanatory note to the Protocol, the Federal Tax Service of the Russian Federation will be entitled to request from Swiss colleagues information on Russian citizens suspected in tax avoidance, including information at the disposal of banks, credit institutions, nominal holders, agents and trust managers.
Moreover, the Protocol provides for unhampered application of domestic law provisions on countering so-called “thin capitalisation”.
The Protocol also clarifies the term “resident”. This term is now in compliance with the current requirements of international taxation.
To sum up, the amendments introduced by the Protocol are aimed at fulfilling the recommendations of the Organisation for Economic Co-operation and Development. Russian taxpayers should not fear the most high profile amendments concerning exchange of information as the Protocol provides for restrictions on such exchange: particularly, automatic and spontaneous exchange are not provided for; and requests of a random nature (“fishing expeditions”), i.e. requests for information which is unlikely to relate to the tax matters of the taxpayer, are prohibited.
[Federal Law No. 167-FZ “On ratifying the Protocol on amendments to the Treaty between Russian Federation and Swiss Confederation on avoidance of double taxation in respect of taxes on income and on capital signed in Moscow on 15 November 1995”, dated 2 October 2012; Federal Law No. 155-FZ “On ratifying the Convention between the Government of the Russian Federation and the Government of Argentinean Republic on avoidance of double taxation in respect of taxes on income and on capital”, dated 2 October 2012; Federal Law No. 156-FZ “On ratifying the Treaty between the Government of the Russian Federation and the Government of the Latvian Republic on avoidance of double taxation in respect of taxes on income and on capital”, dated 2 October 2012]