We have a team of professionals to assist you with your requirements related to Russia, please feel free to write us at [email protected]

Book An Appointment

India-Russia Double Taxation Avoidance Agreement (DTAA)

The Double Taxation Avoidance Agreement (DTAA) signed by the governments of India and the Russian Federation on December 29, 1994, and in force since June 22, 1996, serves as a crucial instrument in the realm of international taxation. The primary objective of this agreement is the elimination of double taxation and the reduction of fiscal evasion concerning income taxes. In order to ensure compliance with international standards and combat Base Erosion and Profit Shifting (BEPS), the signing states have issued a synthesized text that provides additional clarity and adjustments to the agreement.

Applicability of the DTAA

The DTAA applies to individuals and entities that are residents of either India or Russia and are liable to pay taxes in both countries on the same income. This treaty specifically addresses the following types of taxes:

In Russia:

  1. Taxes on profits (income) of enterprises and organizations.
  2. Income tax on individuals.

In India:

  1. Income tax, including any surcharge thereon.

Key Highlights

  1. Taxation of Business Profits: According to the DTAA, business profits are taxable in the country where the business is conducted. However, if a business maintains a permanent establishment in both countries, the profits will be taxed in the country where the permanent establishment is located.
  2. Taxation of Dividends: Dividends paid by a company of one country to a resident of the other country are taxable in the country of residence. Notably, the tax rate on dividends cannot exceed 10% of the gross amount of dividends.
  3. Taxation of Interest and Royalties: Interest and royalties paid by a resident of one country to a resident of the other country are taxable only in the country of residence. However, the tax rate on interest or royalties cannot exceed 10% of the gross amount.
  4. Capital Gains Tax: Capital gains arising from the sale of shares or other movable property are taxable only in the country where the seller is a resident. However, gains from the sale of immovable property are taxable in the country where the property is located.
  5. Exchange of Information: The DTAA facilitates the exchange of information between the tax authorities of both countries to prevent tax evasion and fraud. This information sharing ensures transparency and adherence to tax laws.
  6. Withholding Tax Rates: Withholding tax rates of 10% apply to interest, dividends, and royalties. Government institutions are exempt from taxes on interests earned.
  7. Directors’ Fees: Directors’ fees and similar payments received by a resident of one contracting state as a member of the board of directors of a company resident in the other contracting state may be subject to taxation in the latter state.

Inference

The India-Russia Double Taxation Avoidance Agreement includes essential clauses to eliminate double taxation and promote fair and transparent taxation practices. Notably, it follows the credit system to avoid double taxation in Russia, with corresponding deductions permitted in India. Additionally, it establishes mechanisms for the exchange of information between tax authorities, helping to prevent tax evasion and fraud.

In summary, the India-Russia DTAA aims to provide clarity and certainty to taxpayers in both countries, thereby encouraging cross-border trade and investment. It plays a pivotal role in facilitating economic cooperation and bilateral relations between India and Russia.

For comprehensive legal counsel and support regarding the India-Russia Double Taxation Avoidance Agreement or any other international tax agreements, please reach out to Chandrawat & Partners. Our team of dedicated legal experts specializes in international tax matters and is committed to providing tailored legal guidance to address your specific needs. We prioritize delivering high-quality legal services to ensure your satisfaction and confidence. If you have questions or require assistance with your legal concerns, please do not hesitate to contact us. We are here to serve you with professionalism and dedication.

To know more about DTAA relations between India and Russia, please download our Guide.

Download Guide