Double Taxation Agreement between Russia and Germany: What You Need to Know
In today`s global economy, many international businesses operate across borders, bringing with them a range of tax challenges. The double taxation agreement (DTA) between Russia and Germany is one such tool that helps both countries avoid double taxation and promote international trade. In this article, we will explore what the DTA is, what it covers, and why it is important for businesses operating between Russia and Germany.
What is a Double Taxation Agreement?
A DTA is an agreement between two countries to avoid double taxation of income or gains arising in one country but received by residents of the other country. The goal of a DTA is to ensure that taxpayers don`t pay taxes on the same income twice, once in each country. DTAs also aim to promote cross-border trade and investment by providing greater certainty about tax obligations in each country.
In the case of Russia and Germany, the DTA entered into force in 1996 and was amended in 2015 to reflect changes in both countries` tax laws. The agreement applies to individuals and companies that are residents of one or both countries, and it covers various types of income and gains.
What Does the DTA Cover?
The DTA between Russia and Germany covers various types of income and gains, including:
– Business profits: Profits of a company that arise in one country but are received by a resident of the other country are taxable only in that country.
– Dividends: Dividends paid by a company that is a resident of one country to a resident of the other country are subject to a reduced withholding tax rate of 5%.
– Interest: Interest paid by a resident of one country to a resident of the other country is subject to a reduced withholding tax rate of 10%.
– Royalties: Royalties paid by a resident of one country to a resident of the other country are subject to a reduced withholding tax rate of 10%.
The DTA also covers other types of income, such as capital gains from the sale of shares or immovable property, and income from employment or self-employment. The agreement also includes provisions for the exchange of information between the tax authorities of the two countries to combat tax evasion.
Why is the DTA Important for Businesses?
The DTA between Russia and Germany is essential for businesses operating between both countries as it helps to avoid double taxation and promotes cross-border trade and investment. Without the DTA, businesses would be subject to double taxation on their income, making it more expensive to operate across borders.
The agreement also provides greater certainty for businesses about their tax obligations in both countries. By knowing the tax rates and rules in advance, businesses can make better-informed decisions about their operations and investments.
In conclusion, the DTA between Russia and Germany is a crucial tool for promoting cross-border trade and investment while avoiding double taxation. Businesses operating between these two countries should be aware of the agreement`s provisions and seek professional tax advice to ensure compliance with the DTA`s requirements.
