Denunciation of tax agreement between Russia, Netherlands could compel Yandex to change corporate structure
MOSCOW. April 1 (Interfax) - The denunciation of the agreement between Russia and the Netherlands on avoidance of double taxation could be a blow to Yandex, the parent company of which is registered in Amsterdam.
Last December, the Russian Finance Ministry announced it had begun drafting a bill to denounce the agreement with the Netherlands after several rounds of negotiations to amend the agreement to increase withholding tax to 15% on dividends and interest were unsuccessful.
Yandex N.V . is domiciled in the Netherlands, but its main operating subsidiaries are established and operate in Russia. Currently, dividends from Russian subsidiaries which are paid by Yandex N.V. are taxed at the rate of 5%, but if the Finance Ministry's initiative is implemented, the tax rate will be increased to 15%. Thus, denunciation could significantly affect the ability to pay dividends to the parent company, according to Yandex's annual report published Thursday.
If the law on denunciation of the tax agreement with the Netherlands is passed in H1 2021, dividends will be taxed at an increased rate starting in early 2022, Yandex said.
"This will have a significant negative impact on our ability to 'raise' dividends to the level of the parent company and may require us to consider changes to the group's corporate structure," the report said.
While the denunciation procedure is underway, Russia and the Netherlands still have an opportunity to reach an agreement. Earlier, the Finance Ministry already began drafting bills on denunciation with regard to the convention between Russia and Malta and the agreement with Cyprus. As a result, both countries agreed to the new conditions proposed by Russia. However, there has been no progress in negotiations with the Netherlands so far: the Ministry of Finance told Interfax that the procedure for denunciation of the agreement has been launched.