President Vladimir Putin signed a law denouncing the agreement between the Russian government and the government of the Netherlands on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income and property, which was signed in Moscow on December 16, 1996.

The document was published on the official Internet portal of legal information.

The bill was approved by the Cabinet of Ministers of the Russian Federation on April 12, and the corresponding decree was signed by Prime Minister Mikhail Mishustin.

After that, the document was submitted to the State Duma, on May 11, the lower house adopted a law on denunciation.

On May 19, the bill was also approved by the Federation Council.

At the same time, the spokesman for the Ministry of Finance of the Netherlands Remco Raus said in April that the country negatively assesses Russia's steps to terminate the agreement.

“The Netherlands considers the last steps of Russia in the process of termination of the agreement as undesirable.

At the same time, we will try to continue the dialogue with Russia to find a solution that suits both sides, ”said Routh.

  • Ministry of Finance of the Netherlands

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The decision to cancel the agreement was made after the Russian Ministry of Finance was unable to agree with the Dutch authorities on its revision.

The department reported that they had held several rounds of negotiations with the Dutch side on the issue of increasing the tax to 15% in respect of dividends and interest.

In particular, the Ministry of Finance offered the kingdom conditions similar to those that had already been agreed with Cyprus, Luxembourg and Malta, but no agreements were reached.

"The approach to changing the agreement, proposed by the Netherlands, was not supported by the Russian side, as it provided for the preservation of separate channels for the withdrawal of funds from the country," the Ministry of Finance explained.

The department noted that during the period of the agreement, significant resources were withdrawn to the Netherlands in the form of interest payments and dividends.

In particular, in 2017 the volume of such payments amounted to more than 457 billion rubles, in 2018 - more than 412 billion rubles, and in 2019 - more than 339 billion rubles.

The existing agreement, the Ministry of Finance emphasized, provides for attractive tax conditions and allows the withdrawal of profits from Russia, paying tax at an effective rate of 2-3%, while the corresponding rate in Russia is several times higher.

“To fulfill the president’s order on taxation of income in the form of dividends and interest paid from the territory of the Russian Federation to the Netherlands at a rate of 15%, the Ministry of Finance of Russia began the procedure for preparing a federal law on denunciation of the agreement for submission to the State Duma,” the department said in December.

Recall that in March 2020, Vladimir Putin, during an appeal to citizens, said that all income payments (in the form of interest and dividends) leaving Russia abroad, to offshore jurisdictions, should be taxed adequately.

He stressed that 2/3 of this money "within the framework of various so-called optimization schemes" is taxed at a rate of 2%.

At the same time, Russian citizens pay income tax of 13% even on small salaries. 

“This is, to put it mildly, unfair.

Therefore, I propose for those who withdraw their income in the form of dividends to foreign accounts, to provide a tax rate for such dividends of 15%.

Naturally, this will require adjusting our agreements on the avoidance of double taxation with some countries, ”Putin said.

He clarified that if foreign partners do not accept such a proposal, then Russia will withdraw from these agreements unilaterally. 

On December 22, the State Duma, at a plenary meeting, ratified tax agreements with Cyprus and Luxembourg, increasing the tax on dividends and interest to 15%.

Russian Deputy Finance Minister Alexei Sazanov noted that after the law on termination of the agreement is signed, a notification will be sent to the Netherlands through the Ministry of Foreign Affairs.

He noted that Russia offers all countries the same conditions.

“We said that our position is equal conditions for Cyprus and the Netherlands,” he said.

According to him, "colleagues do not agree to these conditions."

Later, Sazanov said that the department would further propose changes to tax agreements with Hong Kong, Singapore and Switzerland.

“In terms of continuing to work on changing the agreements, as I have repeatedly noted, we have three key jurisdictions left - Switzerland, Hong Kong, Singapore. We will also propose to amend the agreements on them, ”TASS quoted him as saying.