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Actual Right to Income: Risk Calculator

Income stream diagram

Certain types of income, such as dividends, interest and royalties, are subject to withholding tax in Russia when paid to a foreign company. In the past, confirmation of the foreign company’s tax residence was sufficient in order for a lower rate to be applied.

Since 1 January 2015, new rules have been in effect, under which lower rates provided for in tax treaties are applicable where the foreign party has an “actual right” to income (Articles 7 and 312 of the Tax Code). This means that so-called intermediate (“conduit”) companies cannot claim tax relief even if they have a residence certificate. This concept is also sometimes referred to as the beneficial ownership rules.The new rules leave much room for interpretation, which may give rise to disagreements during tax audits. Past arbitration rulings provide a basis on which to identify key factors and assess how safe it is for lower rates to be applied in a given structure.

We have prepared this questionnaire based on our analysis of existing case law. Answering the questions will enable you to evaluate the probability of winning a dispute with a tax inspectorate in the event that it disagrees with the applicability of tax reliefs in your situation.

Tax treaty benefits do not apply to agents, brokers or other intermediaries that act in the interests of third parties and do not recognize the income received in their financial statements. There is a high risk that reduced tax treaty rates will be challenged in such circumstances.

Please respond to the above questions to continue

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The beneficial ownership risk level is:

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The risk is calculated using a model that cannot take account of all factors relevant to the evaluation of beneficial ownership risk. Furthermore, this is a demo version of the risk calculator based on a shortened list of factors. For a more accurate assessment of beneficial ownership risk, you can request professional advice by completing the form to the right.

The risk that the immediate recipient of income is not the beneficial owner of that income does not mean that another entity in the income payment stream cannot apply tax treaty benefits. The applicability of the look-through approach requires further analysis.
Calculate the risk

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