Russian govt to ink investment-revenue agreement with UAE
MOSCOW. Feb 11 (Interfax) - The Russian government intends to sign an agreement with the government of the United Arab Emirates concerning the taxation of income on investments between the countries and their financial and investment foundations, as per a resolution signed by Russian Prime Minister Vladimir Putin.
The Russian Finance Ministry has been instructed to hold talks with the UAE to secure intent to sign this agreement.
The agreement would apply to such taxes as profit taxes (Russia), corporate taxes (UAE), and income tax. And it is largely aimed at preventing dual-taxation.
Revenue made by one country from real estate property in the other may be taxed in the country where that property is located. Dividends paid by resident-companies in one country to the other or its financial and investment foundations would be freed from paying taxes in their own country. This right also extends to interest revenue. Income made by one of the countries in the agreement or its financial and investment foundations from alienation of shares or other rights, 50% of which is offered by real estate property to the other country in the agreement is to be taxed only in the latter country.
As previously explained in materials for a session of the Russian government presidium, the UAE has a significant amount of financial resources concentrated in investment funds, bank and other financial institutions that fully belong to the government, interested in making capital investments in various sectors of the Russian economy.
But the country does virtually no taxing of the profits of organizations or income of private individuals, in light of which it is not possible for Russia and the UAE to conclude agreement for the avoidance of double-taxation because double-taxation in Russia-UAE financial and economic relations in principle does not arise.
So the parties have arrived at the conclusion that to stimulate bilateral investments a special agreement is needed that would establish a maximally favorable tax regime for investment income earned by institutions belonging to either country. Since the tax regime relative investment income made by private-sector organizations and private individuals of both countries remains in the framework of the agreement, the risk of them using it to minimize taxes is nullified, the materials say.
The attracting of Arab investors to privatization in Russia, particularly the sale of 10% in VTB was announced earlier. Deputy Prime Minister Igor Sechin said that there were talks underway with Asian and Arab investors on the purchase of the bank's stock.