Tax rates in the United States for non-residents:

• Dividends — 30%.

• Coupons (interest) — 30%.

• Capital gains — not taxed for U.S. non-residents if the period of stay in the United States is less than 183 days per year.

Personal income tax rates in Russia:

• Until 1 January 2025 — 13% for income up to RUB 5 million / 15% for amounts above.

• From 1 January 2025 — 13% for income up to RUB 2.4 million / 15% for amounts above.

At the same time, it remains possible to credit tax paid in the source country (the United States), but subject to the rates established in the suspended DTT provisions (Letter of the Russian Ministry of Finance dated 29.05.2023 No. 03-08-09/48856, Letter of the Russian Ministry of Finance dated 30.08.2022 No. 03-08-05/84333).

Effective tax rates for income of Russian tax residents:

• Dividends: the United States withholds 30%, and only 10% may be credited in Russia (Article 10 of the DTT), resulting in an additional 3% / 5% payable. Total rate — 33% / 35%.

• Interest: the United States withholds 30%, with an additional 13% / 15% payable in Russia. Total rate — 43% / 45%.

• Capital gains: tax is withheld only in Russia at a rate of 13% / 15%.

Personal income tax exemption on the sale of shares remains available where the holding period exceeds 5 years. From 1 January 2025, the benefit is capped at RUB 50 million.

What do we offer?

1. One possible way to reduce the tax burden is to establish a company in South Africa and transfer U.S. assets to it.

Advantages:

·         South Africa has a valid DTT with the United States, which makes it possible to reduce the effective tax rate.

• Dividends: taxed in South Africa, with the United States withholding 15% (Article 10 of the South Africa – United States DTT).

In South Africa, an exemption from tax may apply to foreign dividends on listed shares. Total rate — 15%.

• Interest: taxed only in South Africa (Article 11 of the South Africa – United States DTT).

The tax rate in South Africa is 27%.

• Capital gains: taxed only in South Africa (Article 21 of the South Africa – United States DTT).

In South Africa, only 80% of such income is included in the tax base. Total rate - 21.6%.

·         The beneficiary of a South African company may be exempt from CFC profit tax at the effective rate (subclause 3, clause 1, Article 25.13-1 of the Russian Tax Code).

·         South Africa has a valid DTT with Russia (relevant with respect to dividends distributed from a South African company to a Russian tax resident):

• Dividends payable to the beneficiary, a Russian tax resident: taxed in Russia, with South Africa withholding 15% (Article 10 of the South Africa – Russia DTT).

In Russia, tax paid in South Africa may be credited in full. Total rate — 15%.

2. In addition, we reviewed the option of establishing a company / sole holding vehicle (SPF) in Luxembourg and obtained the following result:

·         Luxembourg has a valid DTT with the United States.

Company (fully taxable person):

o    Dividends: taxed in Luxembourg with a credit for U.S. tax, with the United States withholding 15% (Article 10 of the Luxembourg – United States DTT).

The tax rate in Luxembourg (up to EUR 175,000) is 15%.  Total rate – 15%.

o    Interest: taxed only in Luxembourg (Article 11 of the Luxembourg – United States DTT).

The tax rate in Luxembourg (up to EUR 175,000) is 15%.  Total rate – 15%.

o    Capital gains: taxed only in Luxembourg (Article 22 of the Luxembourg – United States DTT).

The tax rate in Luxembourg (up to EUR 175,000) is 15%.  Total rate – 15%.

o    CFC profit tax in Russia in 2025 (if it exceeds RUB 10 million): 13% - 22%

SPF:

o    The SPF does not pay taxes in Luxembourg. The DTT does not apply to the SPF.

o    Dividends: the United States withholds 30% at the domestic rate. Total rate - 30%.

o    Interest: the United States withholds 30% at the domestic rate. Total rate - 30%.

o    Capital gains: the United States does not withhold tax. Total rate – 0%.

6 card 3. Avoidance / deferral of CFC profit tax may be possible if the foreign company is transferred to the level of a Personal Foundation in DIFC (UAE) in a structure where the Foundation is not recognized as a CFC in Russia.

We are ready to consider and discuss other structuring options depending on your situation.
Contact us: info@alpinetax.ru