Ivan Bykovskiy, Mikhail Prokopets

Russian Authorities introduced a Legislative Initiative to Abolish the Treaties on the Avoidance of Double Taxation

Published initially on Football Legal (https://football-legal.com)

According to the recent announcement by the Ministry of Foreign Affairs of Russia, a legislative initiative will be introduced with the primary intention of suspending the application of double taxation treaties with so-called “non-friendly” countries.

To give a better look at the situation, the military conflict between Russia and Ukraine shall be mentioned, during which most European Union countries, the USA, Canada, the United Kingdom, and certain other countries issued sanctions against Russia, which in turn put such countries into the list of “non-friendly”. Such a concept limits international cooperation and trade between such countries, creating several legislative barriers to their existing international relationships. As a further step in such sanction politics, Russian authorities claim they are introducing an initiative to suspend double taxation treaties.

It is crucial to note that there is no established order of suspension of the double taxation treaty in most cases. The Vienna Convention on the Law of Treaties (1969) states in Article 57:

“[…] The operation of a treaty in regard to all the parties or to a particular party may be suspended:

(a) in conformity with the provisions of the treaty; or
(b) at any time by consent of all the parties after consultation with the other contracting States.”

As an example, we will take the Double Taxation Treaty between Russia and Spain, Article 29 of which states the following:

“This Convention shall remain in force until denounced by one of the Contracting States. Either Contracting State may terminate the Convention by giving, through diplomatic channels, notice of termination at least six months before the end of any calendar year following after the period of five years from the date on which the Convention enters into force. In such event, the Convention shall cease to have effect in respect of taxes on income or on capital relating to any tax year beginning on or after the first day of January in the calendar year next following that in which the notice of termination is given.”

Therefore, this Treaty does not have a mechanism to suspend in its own wording. Should the Russian Government want to suspend it somehow, it will follow the provisions of its national legislation, particularly Federal Law 105-FZ of 15 July 1995 on International Treaties.

Lastly, why is it relevant for the sports sphere? The principal implication for athletes and coaches will be the worsening of tax burdens. In the example of the Spanish Double Taxation Treaty, Article 15 states that:

“[…] salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.”

Following that, Article 17 of the same Treaty says:

“[…] income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as a sportsman, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.”

Therefore, up until the current situation, the income of athletes and coaches received as salary from Russian clubs was taxed only in Russia. However, should the Russian legislator suspend or denounce the application of double taxation treaties, it would mean that such income should be additionally taxed in another country, in the given example of Spain, with progressive income tax rates close to 50% maximum in addition to flat 13% income tax in Russia. This legislative initiative, should it pass the necessary procedure and be approved, will create a very dangerous, superficial and economically solid barrier for foreign players and coaches to come to Russian professional football clubs, as it is clear that no one would want to pay around 65% of taxes on their income.


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