Russia at once tightened the conditions for obtaining tax benefits in agreements with many countries popular among business: it will become much more difficult to prove the right to them, especially holding companies. The new rules are provided for by the International Convention against Abuse of Tax Agreements (MLI) - last week the Ministry of Finance published a list of countries with which it has already earned since 2021.

The attached to the country's Convention simultaneously and automatically complicates the use of benefits that can save on taxes or not pay them at all. For example, by agreement with Switzerland from dividends and interest on loans, you need to pay only 5 and 0%, respectively, instead of 15%. Now it will be more difficult to justify the right to such benefits. Agreements are considered to be corrected automatically from 2021, taking into account the choice of each pair of states, explains the Deloitte partner Natalya Kuznetsova.

The list of 34 countries published by the Ministry of Finance. Including - Singapore, Cyprus, Great Britain, the Netherlands. With some of them, the terms of tax agreements have already deteriorated: for example, by sending dividends to Cyprus since 2021, you can not pay from them only 5% of the tax, the rate has grown to 15%. But the previous Royalti benefits have been preserved, KPMG partner Alexander Tokarev notes.

What countries did Mli earned for Russia with Russia

Cyprus, Kazakhstan, Indonesia, Czech Republic, Portugal, Saudi Arabia, Cyprus, Singapore, Luxembourg, Great Britain, Belgium, Malta, the Netherlands, etc.

Of the countries that are popular with Russian business, MLI, for example, Germany and Switzerland, have not been subject to the effect of MLI.

How does MLI work?

Mli makes changes to tax agreements with countries that agreed to do this. In all 34 agreements, a new tool has automatically appeared - a test for the main goal of international operations , and at the request of individual countries in agreements with them - a more tough test for restriction of benefits. The first test obliges the company to prove that its participation in the payment chain is really justified and has a business goal, Tokarev explains. The test is very subjective and there are risks that the tax authorities will begin to use it aggressively, he warns.

The second test will be in the agreements of only some countries, for now, Kazakhstan (interest tax and dividends - 10%), Denmark, Iceland, Slovakia, India and Norway. For Russia, he earned in a simplified version - only “qualified persons”, such as people, government agencies or public companies, can use benefits by default. Among them there are no holding companies, structures with intra -group investments and financing (with the exception of banks and participants in the stock market). To use benefits, they will have to prove that they exist and create foreign structures not for the sake of tax benefits.

In agreements with some countries, other restrictions will appear. For example, in an agreement with the Netherlands - new conditions for applying benefits for dividends, more structures can be recognized by a representative office, says Rustam Vakhitov, partner of Crowe Expertise. It will be possible to use a preferential rate (so far by agreement - 5%, but Russia wants to increase it to 15%) only if the Dutch company owned at least a year the necessary capital of the Russian structure.

What does it mean?

For Russia, MLI tools are not new: the Tax Code already has the concept of “actual right to income”. A foreign company built into a chain of transactions must prove that it is not a technical layer, transporting money to offshore transit, but can dispose of income. Otherwise, she will lose the right to reduced tax rates.

But to pass the MLI test for the main goal will be more difficult than prove the right to income, the EY partner Marina Belyakova warns. The use of a foreign company in a country with a convenient tax regime itself may already mean that the test has not been passed, Tokarev notes. Even if tax savings were only one of the main goals of the transaction, the benefit will still be denied. However, many companies, faced with claims, have already abandoned low rates, and key agreements are already revised (for example, with Cyprus), Belyakova notes: structures that survived most likely a test for the main goal. The main issues with this test would be in Cyprus structures, but after changing the agreement with it, the problem became less urgent, Kuznetsova notes.

In judicial practice, there are many cases when the tax authorities disputed the benefits of even newly created structures. One of the latter is the dispute with Acron, which tried to prove that when paying dividends created by Luxembourg structures, the company could use a preferential rate of 5%. Neither tax authorities nor the court convinced the company that Luxembourg structures have enough employees and the rights to dispose of money to be considered a real recipient of income.

What to do?

MLI does not indicate how to confirm the right to a benefit. And the examples of the OECR, when the company passes or does not pass the main goal, is too undead, says PWC partner Galina Naumenko. But in July 2020, the Ministry of Finance explained what could be considered the following evidence:

- documents indicating the availability and amount of tax benefits from the application of the agreement in the transaction;

- information confirming the availability of business benefits from the transaction, as well as its assessment;

- Documents that confirm and substantiate residency in another country, they should also describe the structure of property and changes in it.

To protect yourself, you need to have the most detailed justification of the real business purpose of using companies in other countries-the so-called “protective file”, Tokarev advises. But it is important that the Ministry of Finance and the Federal Tax Service also provide more detailed methodological clarifications, Naumenko concludes.

Another blow to offshore tax schemes