Withholding tax 2026

• A Russian company paying income to a foreign legal entity must withhold the tax itself and is liable for it using its own funds, even if it fails to withhold the amount.
• For recipients from the 38 countries whose agreements were suspended by Decree No. 585, domestic rates apply: 15% on dividends and 25% on interest, royalties, lease payments, and most other forms of passive income.
• Certain exemptions remain in effect despite the suspension—specifically for patents, know-how, maritime shipping, aircraft leasing, and bank interest—provided the parties are not related and the recipient has submitted the necessary confirmations in advance.
• The agreement with the UAE takes effect on January 1, 2026, establishing a 10% rate for all three categories of passive income. As of the same date, the UAE has been removed from the Ministry of Finance’s list of offshore zones.
• Deadlines are strict: the tax must be remitted by the 28th of the month following the payment, and the tax calculation must be filed by the 25th of the month following the reporting period.
• A reduced rate applies only based on documents received prior to the payment date; a certificate arriving a week late will not resolve a dispute.

A quick answer to the main question

If a Russian company pays dividends to a foreign legal entity in 2026, it withholds 15%. If it pays loan interest, license royalties, lease payments, or most other types of passive income, the rate is 25%. These rates apply whenever the recipient has not substantiated their eligibility for benefits under an active tax treaty. However, for residents of the 38 countries listed in Decree No. 585, preferential treaty rates simply do not apply; consequently, the domestic rates of 15% and 25% become the default scenario for them. There are exceptions—albeit specific ones—and we examine each of them below.

Where these rates come from and why they vary

Withholding tax is not a separate tax but rather a form of corporate income tax withheld by the payer. The foreign company receives the funds net of this tax. The logic is straightforward: the state cannot verify the financial records of a firm based in Cyprus or Singapore, so it collects the tax at the point where the funds remain under control—from the Russian payer.

Domestic rate instead of treaty rate

Until August 2023, payment structures were based on double taxation avoidance treaties. Cyprus offered rates of 5% or 10% on dividends and 0% on interest and royalties (subject to certain conditions), with the Netherlands and Luxembourg offering similar terms. Decree No. 585, dated August 8, 2023, suspended these specific treaty provisions with 38 jurisdictions, including most of the European Union, the UK, Switzerland, the US, Japan, South Korea, Singapore, Australia, New Zealand, and Canada.
It is not the treaties in their entirety that have been suspended, but specific articles. Provisions regarding tax residency, information exchange, mutual agreement procedures, and the elimination of double taxation remain in effect. In practice, however, the latter offers little relief: tax authorities in other countries often refuse to grant a credit for Russian tax withheld in excess of the previous treaty limits.

Why interest and royalties are taxed at higher rates than dividends

Dividends are subject to a special 15% rate—established by Subparagraph 3, Paragraph 3, Article 284 of the Tax Code—which has remained unchanged. Interest, royalties, rental income, and "other similar income" fall under the general corporate income tax rate, which rises to 25% starting in 2025 (up from the previous 20%). No specific decision regarding cross-border payments was adopted; rather, the base rate simply increased, causing the cost of all outbound payments—with the exception of dividends—to rise.
This leads to a counterintuitive conclusion: dividends are currently cheaper than interest payments on intercompany loans. The traditional model—whereby profits were repatriated via interest payments rather than distributed as dividends—has been turned on its head. A 10-percentage-point difference on a turnover of several hundred million rubles is sufficient grounds to restructure intra-group financing.

Rates that remained unchanged

Not everything has become more expensive. Income from international transport and the leasing of vessels, aircraft, and containers used in international transport remains subject to a 10% rate. A specific 15% rate applies to payments for work and services provided by related foreign entities (under Subparagraph 9.4, Paragraph 1, Article 309 of the Tax Code); this is a relatively new provision that tax authorities scrutinize closely.Dividends paid to non-resident individuals are subject to a 15% personal income tax (PIT) withholding, regardless of the amount. The progressive tax scale applicable to residents does not apply in this case.

Holding mechanics: what people stumble on most often

Most people find a bid in five minutes. Problems begin with technology: in what currency to count, at what rate, when to pay, what to do if there is no money in the payment at all.

Currency, rate and date

The tax is calculated in the currency of payment of income, and is transferred to the budget in rubles. Recalculation is done at the official exchange rate of the Central Bank on the date of payment of income to a foreign organization - not on the date of the decision on the distribution of profits, not on the date of the act, not on the date of conversion at the bank. The difference between these dates with a volatile exchange rate gives a discrepancy that the inspectorate sees immediately.
The payment date is the date the foreign company actually remits or otherwise receives income. If the obligation is closed by offsetting counterclaims, the date of offset is the date of payment.

Payment deadlines and reporting

Since 2025, the transfer deadline has moved forward and has become noticeably more comfortable: the tax is paid no later than the 28th day of the month following the month of payment. Previously it was the next working day. Many accounting departments still work according to old memory and pay ahead of schedule - this is not a violation, but an extra burden on turnover.
The tax calculation of the amounts of income paid to foreign organizations is submitted to the inspectorate at the location of the tax agent within the deadline for profit declarations: before the 25th day of the month after the reporting period and before March 25 at the end of the year. For a Moscow company, this is its territorial Federal Tax Service, and the calculation is submitted even when the tax was not withheld at all.

When there is no money in payment

A separate situation is non-monetary income: property, offset, debt forgiveness, transfer of rights. The tax agent is still obliged to transfer tax to the budget from the calculated amount, reducing the non-cash income of the foreign company accordingly. The same rule applies when the tax amount exceeds the cash portion of the payment.
The condition that the foreign counterparty receives the amount “net”, and the Russian side pays the tax on top, does not legally relieve the agent from his duties. It simply increases the real cost of the transaction: at a rate of 25%, paying €100,000 net costs €133,333 gross.
Expert opinion.

"Over the past two years, we have dealt with dozens of structures where the owner was confident that he was paying 5% or 0%, but in fact should have retained 15% or 25%. In almost all cases, there is one coincidence: the contracts and corporate scheme were written before 2023 and have not been revised since then. The agreement was suspended, the residence certificate continues to be requested out of inertia, and the rate in the calculation was left as negotiated. Additional accruals do not come from dividends - they are usually noticed. It comes from trademark royalties and interest on the old loan from the parent company, which are paid automatically and therefore fall out of sight. It makes sense to check the structure before payment, and not after the verification act: you can return what was withheld, but almost never what was accrued."

What tax benefits remain and how to use them

The suspension of tax treaties was not absolute. Legislators preserved a number of exemptions and reduced rates for payments to the same 38 countries; these are enshrined in Subparagraph 11 of Paragraph 2 and Paragraph 3.1 of Article 310 of the Tax Code. Federal Law No. 425-FZ of November 28, 2025, revised and extended these provisions: interest paid to banks and agencies is covered until 2036, while other categories are covered until 2029.

Payments that remain tax-exempt

The exemption applies if the income was not taxable under the treaty prior to Decree No. 585 and covers several groups: interest paid to foreign banks and export credit agencies under contracts concluded before August 2023; aircraft rental and leasing under contracts dated before March 5, 2022; broadcasting rights for international sports events; international maritime shipping and vessel chartering under legacy contracts; and income derived from the use of patents, drawings, models, schemes, secret formulas, technologies, and know-how.
The last point warrants careful reading. It does not include software, trademarks, or content copyrights. A payment for a software license is classified as a royalty subject to a 25% tax rate. Conversely, a payment for the transfer of technology or know-how may—all other things being equal—be tax-exempt. The wording used to define the subject matter of the contract determines a difference amounting to a quarter of the total sum.

Conditions required for the benefit to apply

All the listed exemptions share two common requirements. First, the Russian payer and the foreign recipient must not be "interdependent parties" as defined in Article 105.1 of the Tax Code. Intra-group payments are immediately excluded. Secondly, a foreign organization is required to submit to the agent the confirmations specified in Clause 1 of Article 312 of the Tax Code: a certificate of tax residence and confirmation of beneficial ownership of the income.
The payer must possess both documents prior to the payment date—not merely during the quarter of payment or before filing the tax return, but specifically before the funds are actually transferred. Established case law on this matter does not favor tax agents, and courts rarely accept the argument that "the document existed but simply arrived late."

Jurisdictions with lower rates

Changing the recipient country is a viable strategy, but only if backed by genuine business activity. A company lacking an office, staff, and independent decision-making capabilities is classified as a mere conduit; the tax benefit is revoked, and additional tax is assessed at the domestic rate, plus penalties.

UAE: the 10-10-10 formula

The agreement between Russia and the UAE entered into force on July 18, 2025, and applies to income generated from January 1, 2026. It replaced the 2011 treaty, which covered only government entities. The withholding tax rate on dividends, interest, and royalties is capped at 10%. As of the same date, the Ministry of Finance removed the UAE from its list of offshore zones; this grants access to a zero tax rate on income from UAE subsidiaries and simplifies the calculation of CFC (Controlled Foreign Company) profits based on audited financial statements.
For business owners, this means the cost of repatriating profits drops from 15% to 10% for dividends and from 25% to 10% for interest and royalties. However, the UAE company must demonstrate "substance"—meaning it has premises, staff, and local decision-making capabilities. UAE company registration is typically bundled with a residence visa; establishing a genuine presence is difficult without one.

Asia and the post-Soviet region

Agreements with China, India, Vietnam, Thailand, and Indonesia remain fully in effect. A new treaty with Malaysia applies starting January 1, 2026. A key nuance here is that, under certain Malaysian agreements, benefits do not extend to Labuan-based companies; therefore, the treaty text should be reviewed prior to registration, not after.
Nothing has been suspended within the EAEU or the CIS. Kazakhstan, Armenia, Uzbekistan, and Kyrgyzstan continue to operate under the existing terms. This is the fastest option for trading and service-related flows, though it is not always suitable for holding company functions.

Russian Special Administrative Regions (SARs)

Sometimes, the right answer is not to leave. An International Holding Company (IHC) in an SAR—whether on Russky Island or Oktyabrsky Island—offers reduced rates on dividends and interest without involving any cross-border element at all. Transitional concessions for companies that obtained status prior to February 25, 2022, will no longer apply in 2026, so calculations must be based on current conditions.
The choice between an SAR, the UAE, Hong Kong, and EAEU jurisdictions depends not on the rates listed in a table, but on where the funds are ultimately headed, where the beneficial owner resides, and which banks are willing to handle the transaction flow. We cover this in detail in our comprehensive jurisdiction catalog, which includes timelines and costs.

Areas most prone to additional tax assessments

In our experience, problems arise not where things are complex, but where procedures have become routine.

Royalties for software and trademarks

IT companies frequently pay for subscriptions, licenses, API access, and cloud services. Some of these payments are classified as royalties and are subject to a 25% withholding tax. Disputes usually center on whether the arrangement involves the transfer of the right to use intellectual property or the provision of a service. Contract wording determines the outcome, and it is impossible to rewrite terms retroactively.
Trademarks are a separate issue. License fees paid to a parent company for brand usage are subject to both the 25% withholding tax and transfer pricing regulations.

Services from related parties

The 15% rate under Subparagraph 9.4, Paragraph 1, Article 309 of the Tax Code applies to work and services performed within Russia by a related foreign entity. This is a new rule that many corporate groups have overlooked; payments for management services, IT support, and marketing provided by related companies often continue to be made without withholding tax. Tax auditors, however, are well-versed in this provision.

Intra-group loans

Interest on intra-group loans incurs a 25% withholding tax and carries the risk of reclassification as dividends under thin capitalization rules if the debt owed to a related foreign entity exceeds three times the company's equity. In such cases, a portion of the interest cannot be deducted as an expense and is taxed as dividends instead. Facing two separate additional tax assessments for a single transaction is a common scenario during an on-site tax audit.

Our approach to this task

There is no one-size-fits-all solution here. A trading company with operations in China, an IT developer receiving licensing fees, and a real estate portfolio owner face three distinct challenges, even though the applicable tax rate is the same for all of them.

Where the analysis begins

We examine actual cash flows: who pays whom, for what, under which contracts, and who the ultimate recipient is. We then cross-reference this with the current status of agreements and the list of remaining exemptions. At this stage, it often turns out that relocation isn't necessary—simply rephrasing the subject of the contract or altering the financing structure is enough.
If the structure does require changes, we calculate the total cost: registration, maintenance, banking services, reporting, and auditing. Saving 10 percentage points on the tax rate makes no sense if the cost of maintaining the company consumes even more.

What the client receives

A fund flow diagram specifying rates for each payment, a list of documents to gather before the first payment, and a timeline of deadlines. Plus, an understanding of where the structure is vulnerable and what to expect during an audit. We work remotely, consulting with clients from Moscow and the regions via phone, messaging apps, or email—no in-person visit is required at any stage.
If speed is a priority, we have ready-made companies with active bank accounts available. You can discuss a specific project via our contact details and see how we work on our company page.