In 2022, new trends shaped tax litigations over distributions to foreign persons, to name but a few:
more types of outbound payments were treated as passive income
withholding tax was increasingly charged at a 20-percent rate applicable to Other Income
payments for services that were not effectively rendered were treated as illegitimate foreign currency transaction
tax treaty benefits were disallowed on the mere account of ‘tax abuse’.
On top of that, mutual agreement procedures involving Russia nearly came to a halt.
Therefore, even if a taxpayer believes that the Russian taxation is inconsistent with the objectives and principles of a tax treaty, the dispute would be hard to solve at the transnational level.
We recommend thoroughly assessing the potential risks and their impact when planning any cross-border transactions, even with non-hostile states.