On August 9th, 2023, Decree No. 585, signed by the President of the Russian Federation, on the suspension of individual provisions of bilateral agreements to avoid double taxation (DTA) with a total of 38 countries, including Germany, Austria, Switzerland and Italy, was published. With regard to the double taxation agreement between Germany and Russia, the Russian Federation has declared with the new regulation that Articles 5 to 22 and Article 24 of the DTA should be suspended by the Russian side of the contract. With the announced suspension of individual provisions of the DTA, German companies and in particular their permanent establishments and subsidiaries operating on the territory of the Russian Federation will lose a number of preferences, such as:

• So far, construction work or assembly in Russia only constitutes a permanent establishment if its duration exceeds 12 months. After the suspension of this provision, a permanent establishment is established after one month.
• Preferences for the taxation of dividends and profit distributions will be suspended, so that a large number of German subsidiaries will have to pay a tax rate of 15 percent instead of the previous 5 percent.
• Interest income and license fees that a company based in Germany generates from loan agreements or license agreements with a company based in Russia will now also be taxed in Russia at the tax rate of 20 percent.

It now remains to be seen how the authorities of the partner countries will position themselves on the announced suspension and how the innovations will be applied in practice.