The Dutch Ministry of Finance has published a letter to Parliament regarding the termination of the 1996 double tax treaty with Russia.
The letter indicates that notice of termination of the document was received from the Russian side, and, therefore, the agreement will cease to be valid on January 1 of next year. Russia has officially notified the Netherlands of the denunciation of the tax treaty. It will cease to apply on January 1, 2022.
Previously, Amsterdam promised to continue negotiations with Moscow until the deadline for terminating the deal. The Ministry of Foreign Affairs of the Russian Federation officially notified the Dutch side of the denunciation of the agreement between the government of the Russian Federation and the government of the Netherlands on the avoidance of double taxation,” the department said in a statement. The agreement terminates on January 1, 2022.
Earlier, the representative of the Ministry of Finance of the Netherlands, Remco Rous, stated that Amsterdam intends to continue negotiations with Moscow until the termination of the deal. He noted that the Russian authorities have put forward too strict requirements that would have a negative impact on Dutch companies.
The Ministry of Finance began drafting a bill to denounce the agreement with the Netherlands in December last year, after several rounds of negotiations to change the terms of the deal failed. On May 26, the document was signed by Russian President Vladimir Putin.
The explanatory note to the project stated that Russia offered the Netherlands terms for revising tax agreements similar to those agreed with Cyprus, Luxembourg and Malta (increasing the tax on withdrawals of funds for Russian residents to 15%). However, the Netherlands did not agree with the proposal and insisted on expanding the list of income that should be taxed at reduced rates.
Russian business asked the authorities not to break the agreement with the Netherlands. The head of the Russian Union of Industrialists and Entrepreneurs (RSPP), Alexander Shokhin, in a letter to Prime Minister Mikhail Mishustin noted that the denunciation would lead to a reduction in investment activity, a decrease in the quotations of companies that held an IPO in the Netherlands, and a reduction in the dividend flow from this country to Russia.
Consultants and business representatives called the possible rupture of the agreement a “catastrophe.” According to them, Russian companies operating through this country face not just a sharp increase in the tax burden, but also double taxation. In particular, the parent companies of X5 Retail Group and Yandex are registered in the Netherlands, and the Russian Svyaznoy group is owned by the Dutch Svyaznoy N.V.
In the future, the Ministry of Finance intends to adjust tax agreements with Hong Kong, Singapore and Switzerland, Deputy Minister of Finance Alexey Sazanov previously stated. According to him, “this will make it possible to cover more than 90% of payments to transit jurisdictions and additionally replenish the treasury.”