Profit shifting in case of double taxation

The Federation Council approved the bill on ratification of the international Convention to prevent base erosion and profit shifting.

The Convention is aimed to prevent the abuse of interstate agreements on avoidance of double taxation, as a result of which profit is transferred to countries with a reduced tax rate. This leads to significant losses of budgets on income taxes. According to OECD, the countries budgets lose $100–240 billion per year due to profit shifting to low-tax jurisdictions. That is between 4 and 10 percent of global income tax revenues.

The bill provides the possibility of applying the provisions of the Convention without bilateral negotiations for each of the 71 existing intergovernmental agreements on the avoidance of double taxation reached by Russia.

Thus, the Russian Federation reserves the right not to apply particular provisions of the Convention to all or part of these agreements.

Such jurisdictions as Great Britain, Cyprus, Luxembourg and the Netherlands, which are popular among the Russian entrepreneurs, are ready to make occasional changes to the agreements with Russia.