Russia's tax treaties in 2026: why investors from China and the Gulf pay less than European ones
In 2023 Russia suspended substantive provisions of its tax treaties with 38 states — every EU member, the UK and the USA among them. Treaties with China, the UAE, India and Turkey were untouched. The result is a genuine, legally grounded split: on the same payment out of the same Russian company, a Chinese owner can face 0% where a German owner faces 25%.
First, the honest baseline
We should be straightforward, because a prospective investor will check. Russia is not a low-tax jurisdiction in 2026, and it has been moving in the opposite direction.
| Headline tax | 2024 | 2026 |
|---|---|---|
| Corporate profit tax | 20% | 25% |
| VAT (standard rate) | 20% | 22% |
Anyone claiming Russia is a low-tax haven is quoting pre-2025 figures. That is not the argument, and it is not why our clients incorporate here.
The real argument is relative and specific: for an investor from China, the UAE or another partner jurisdiction, the cost of getting profit out of Russia is materially lower than for a Western investor — because the treaty network still works for them and not for their competitors. That difference is where the money is.
What was suspended, and what survived
Presidential Decree No. 585 of 8 August 2023 suspended substantive provisions of tax treaties with 38 states, later entrenched in statute by Federal Law No. 598-FZ of 19 December 2023. The suspension runs open-ended, until the states concerned "remedy the violations" or the treaties end.
The suspended list covers, among others: all EU member states, the UK, the USA, Switzerland, Norway, Japan, Singapore, Australia, New Zealand, Canada and South Korea.
Not suspended — treaties fully in force: China, the UAE, India, Turkey, Saudi Arabia, Qatar, Kuwait, Iran, Egypt, Brazil, Kazakhstan, Belarus, Vietnam, Malaysia, Indonesia and others.
Two refinements worth knowing:
- Suspension is not termination. The treaties legally survive; the distributive articles — dividends, interest, royalties, permanent establishment, business profits — simply stop operating. A handful of treaties have gone further and been fully terminated: the Netherlands (2022), Ukraine (2023), Denmark and Latvia (2024) and Lithuania from 1 January 2026.
- The trend is still tightening. Germany notified Russia in June 2026 that it will suspend the 1996 treaty in full from 1 January 2027. Finland's full suspension took effect on 1 July 2026. Nothing suspended under Decree 585 has been restored.
The rates with no treaty
Where treaty relief is unavailable, bare Russian domestic law applies to payments from a Russian company to a foreign owner without a permanent establishment:
| Payment | Domestic rate 2026 | Note |
|---|---|---|
| Dividends | 15% | Unchanged |
| Interest | 25% | Raised from 20% on 1 Jan 2025 |
| Royalties | 25% | Raised from 20% on 1 Jan 2025 |
Note the common error here: many articles still say "20%", and many say withholding "rose to 25%" without excepting dividends. Dividends did not rise. What rose is the residual rate, which catches interest and royalties because neither has a special rate of its own.
The UAE treaty — new, and it changes the picture
This is the most significant development for Gulf investors in a decade.
The previous instrument, signed in 2011, covered only state and financial-investment institutions. Private business got nothing from it and fell back on domestic rates. A full treaty was signed on 17 February 2025, ratified by Federal Law No. 189-FZ of 7 July 2025, and applies from 1 January 2026.
| Payment | Treaty cap | Was (domestic) |
|---|---|---|
| Dividends | 10% | 15% |
| Interest | 10% | 25% |
| Royalties | 10% | 25% |
Each article also carries a 0% exemption where the recipient is a Contracting State or one of its listed financial and investment institutions. The treaty extends to UAE free-zone companies, and the UAE was removed from Russia's offshore blacklist with effect from 1 January 2026.
For a UAE holding structure receiving interest or royalties, this is a 15-percentage-point improvement.
China — the strongest rates in the network
The operative instrument is the treaty of 13 October 2014, amended by the Protocol of 8 May 2015, in force since 2016. It replaced the 1994 treaty — and this matters, because search engines still surface the 1994 text with its obsolete 10/10/10 rates.
| Payment | Rate | Condition |
|---|---|---|
| Dividends | 5% | Beneficial owner is a company (not a partnership) directly holding ≥25% of capital, and that holding is worth ≥ EUR 80,000 |
| Dividends | 10% | All other cases |
| Royalties | 6% | Includes leasing of industrial, commercial and scientific equipment |
| Interest | Source-state relief | Under the 2015 Protocol |
The three dividend conditions are cumulative. In addition, a 365-day continuous holding period including the payment date applies, along with a principal purpose test. Fail to substantiate any of it and the domestic 15% applies instead.
The comparison that matters
Same Russian company, same payment, different shareholder jurisdiction:
| Shareholder in | Dividends | Interest | Royalties |
|---|---|---|---|
| 🇨🇳 China (qualifying holding) | 5% | Relief | 6% |
| 🇦🇪 UAE | 10% | 10% | 10% |
| 🇩🇪 🇫🇷 🇮🇹 EU · 🇬🇧 UK · 🇺🇸 USA | 15% | 25% | 25% |
On a royalty stream, a Chinese licensor keeps 94 kopecks in the ruble where a German licensor keeps 75. On interest, the gap is wider still. This is not a planning trick — it is the plain consequence of which treaties are operative, and it is durable for as long as the suspensions stand.
Claiming a treaty rate is not automatic
Having a treaty is necessary, not sufficient. Article 312 of the Tax Code requires the following before payment:
- A tax residency certificate from the counterparty's competent authority, properly certified;
- Confirmation of beneficial ownership — the recipient must not be a conduit passing income onward;
- Supporting evidence of any qualifying condition, such as the 25% holding and EUR 80,000 value in the China case, tested at the payment date;
- The 365-day holding period where applicable;
- A principal purpose test — benefits are denied if obtaining them was a principal purpose of the arrangement.
Two practical consequences. First, the Russian payer bears the exposure as tax agent — if documentation fails, the Russian company is assessed, not the foreign recipient. Second, a UAE or Hong Kong company interposed over what was a European group is precisely the fact pattern the anti-abuse rules target. Substance — real premises, real staff, real decisions — is what makes the claim survive.
Getting profits out — the question behind the question
Withholding rates only matter if the money can leave. Here the split between jurisdictions appears again, and it is sharper than the tax split.
For shareholders in jurisdictions Russia has not designated unfriendly — the UAE and China among them — the counter-sanctions machinery on profit distributions does not apply. Dividends are paid through standard procedures. The practical constraints are banking ones: the payment has to exit through a correspondent network, and CNY and AED are the working channels.
For shareholders in designated jurisdictions the position is materially harder: distributions above a monthly aggregate limit route to a restricted-type account unless a discretionary permit is granted, and the limit is aggregated across all foreign creditors, not per shareholder.
This is the single most important practical difference for a foreign owner, and it points the same way as the tax analysis: where the holding company sits is the decision that determines everything downstream.
Frequently asked questions
Which Russian tax treaties are suspended?
Presidential Decree No. 585 of 8 August 2023 suspended substantive provisions of treaties with 38 states, including all EU members, the UK, the USA, Switzerland, Japan, Singapore, Australia and South Korea. Treaties with China, the UAE, India, Turkey, Saudi Arabia, Qatar and other partners are not affected and remain fully in force.
What withholding tax applies if no treaty is available?
Russian domestic rates apply: 15% on dividends, and 25% on interest and royalties. The 25% figure is the general rate for foreign companies without a permanent establishment, raised from 20% with effect from 1 January 2025.
What does the new Russia–UAE tax treaty provide?
The treaty was signed on 17 February 2025 and ratified by Federal Law No. 189-FZ of 7 July 2025. It sets a 10% cap on dividends, interest and royalties, and applies from 1 January 2026. It replaces the 2011 agreement, which covered only state and financial-investment institutions and gave private business no protection.
What are the treaty rates between Russia and China?
Under the 2014 treaty as amended by the 2015 Protocol: dividends 5% where the beneficial owner is a company directly holding at least 25% of capital worth at least EUR 80,000, otherwise 10%; and royalties 6%. Interest benefits from source-state relief under the Protocol. All conditions are cumulative and must be documented.
Is it enough to set up a holding company in a treaty country?
No. Article 312 of the Tax Code requires a tax residency certificate and confirmation of beneficial ownership before payment. A conduit company that merely passes income on will be denied treaty benefits, and a principal purpose test applies. Substance — real operations, staff and premises — is what makes the claim stand up.
Can a foreign owner get profits out of a Russian company in 2026?
For shareholders in jurisdictions not designated unfriendly, such as the UAE and China, the counter-sanctions restrictions on profit distributions do not apply and dividends follow standard procedures. The practical constraint is correspondent banking rather than Russian law. Shareholders in designated jurisdictions face a monthly aggregate limit above which payments route to a restricted account. We assess this case by case.