Croatia – Russia double tax treaty suspended by Russia
Russia has suspended the enforcement of double tax treaties (DTTs) with 38 countries, including EU member states, Australia, UK, US, Canada, Switzerland, Singapore and Japan.
The affected countries including Croatia will face significant implications. Russia is expected to apply domestic withholding rates: currently 15% for dividends, 20% for royalties, interest, and certain other types of income, and 10% on freight fees paid to corporate non-residents from these countries. Non-resident individuals might face a 30% tax rate in most cases, while dividends could be taxed at 15%.
These so-called source-based taxes are higher than those envisaged by double tax treaty between Croatia and Russia (or other listed countries in fact) The announcement to 'suspend' the application of DTTs without mentioning termination introduces uncertainty, potentially signalling non-compliance with the treaty obligations.
This uncertainty leaves the response and consequences from the affected countries uncertain as well. Properly terminating Croatian DTT with Russia would demand an official notice on or before 30 June, effectively enabling the termination only by the end of year 2025. On the other hand, to add to uncertainty, Croatian tax authorities have been listing double tax treaty with Russia as a valid one.
These so-called source-based taxes are higher than those envisaged by double tax treaty between Croatia and Russia (or other listed countries in fact) The announcement to 'suspend' the application of DTTs without mentioning termination introduces uncertainty, potentially signalling non-compliance with the treaty obligations.
This uncertainty leaves the response and consequences from the affected countries uncertain as well. Properly terminating Croatian DTT with Russia would demand an official notice on or before 30 June, effectively enabling the termination only by the end of year 2025. On the other hand, to add to uncertainty, Croatian tax authorities have been listing double tax treaty with Russia as a valid one.