(May 27, 2015)

On May 26, 2015 the Belgian Government issued a press release announcing that on May 19, 2015 Belgium and the Russian Federation signed a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital (Hereafter: DTA). Although signed, the DTA has not yet entered into force. For the DTA to enter into force, the respective ratification procedures have to been finalized in both countries. When entering into force, the newly signed DTA will replace the existing DTA, which was signed on June 16, 1995.

Paragraph 3 of Article 5 of the DTA (“Permanent establishment”) determines that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than 12 months.

With respect to withholding taxes on dividends Paragraph 2 of Article 10 of the DTA (“Dividends”) determines the following:

“However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

a)     5 per cent of the gross amount of the dividends if the beneficial owner is a company which holds, for an uninterrupted period of at least twelve months, shares representing directly at least 10 per cent of the capital of the company paying the dividends and this holding amounts to at least EUR 80.000 or the same value in roubles;

b)     15 per cent of the gross amount of the dividends in all other cases.

Notwithstanding the preceding provisions of this paragraph, dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident if the beneficial owner of the dividends is a pension fund that is a resident of the other Contracting State, provided that such dividends are not derived from the carrying on of a business by the pension fund or through an associated enterprise.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.”

Paragraph 2 of Article 11 of the DTA (“Interest”) limits the interest withholding taxes to be withheld by the Source State to a maximum of 10% of the gross amount of the interest.

In addition Paragraph 3 of Article 11 of the DTA (“Interest”) states the following:

“Notwithstanding the provisions of paragraph 2, interest shall be exempted from tax in the Contracting State in which it arises if it is:

a)   interest paid in respect of a loan granted or a credit extended by an enterprise of a Contracting State to an enterprise of the other Contracting State;

b)   interest paid to a pension fund, provided that such interest is not derived from the carrying on of a business by the pension fund or through an associated enterprise;

c)   interest paid to the other Contracting State, to one of its political subdivisions or local    authorities or to a public entity.”

Paragraph 3 of Article 11 of the DTA (“Interest”) is interesting since one of the situations mentioned in which the Source State is not allowed to withhold withholding taxes over interest payments made to the extent that such interest is paid on intercompany loans. (NB More situations are mentioned in which the Source State is not allowed to withhold withholding taxes over interest payments).

According to Paragraph 2 of Article 12 of the DTA (“Royalties”) the Source State is not allowed to withhold withholding taxes over Royalty payments.

Furthermore the new DTA contains an article arranging for a mutual agreement procedure (Article 24), an article arranging the exchange of information (Article 25), an article arranging assistance in the collection of taxes (Article 26) and an article regarding limitation of benefits (Article 27).

For further information click on the language of your choice to be forwarded to the text of the Convention between the Russian Federation and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital as available on the website of the Belgian Ministry of Finance (English, French and Dutch).

Are you looking for an other DTA? Then check our section DTAs & TIEAs a very efficient way to locate numerous DTAs.

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