Look through approach accounting, Taxes in Russia,

According to the general rule, a Russian company which pays dividends to a foreign company is liable to withhold tax (WHT) at a standard rate of 15% (if a DTT (Differ Tax Treaty) is applicable, the WHT rate can be reduced up to 5%). Finally, an individual, which receives dividends, is liable to pay personal income tax (PIT): 13% – for Russian tax residents, for non-Russian tax residents it depends on WHT regime in the final chain member taking into account DTT provisions (if applicable).

Russian tax law provides an option which reduces effective tax rate if an ultimate beneficial owner (UBO) of income paid by a Russian company is known for the Russian company and can be declared to the Russian tax authorities: look through approach.

The essence of this approach lies in the ability to declare a person as the UBO of dividends paid by the Russian company. It permits the Russian company to withhold Russian WHT from the UBO dividend income, taking into account provisions of DTT between Russia and UBO jurisdiction. If UBO is a tax resident of Russia, the rate of 13% will be applied.

Such approach can be applied if the UBO of income provides to the Russian company (tax agent) the following documents (information):


  • Certificate of tax residence issued by tax authorities;
  • Written confirmation that they have a factual right for income;
  • Written confirmation that intermediary companies do not have a factual right for income distributed from the Russian company.

It is a relatively new practice.

From our side there are the following questions which a company has to address before applying the look through approach:


  1. There is no approved form of beneficiary confirmation. Nevertheless, there is a requirement to request it. Therefore, the management has to consider all factors affecting the determination of the actual presence of the company.
  2. Look through approach for payments of dividends requires transit nature, i.e. the amount received by the beneficiaries has to be equal to the amounts paid from Russia.
  3. How foreign structures will cover operating expenses if there are no other activities apart from holding investments.
  4. Existence of a double tax treaty between Russia and the country of incorporation of the first company receiving dividends.

We will continue to keep you updated in relation to the legislative developments. General conclusions are that companies may “re-think” and try optimize their foreign structures.

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