Legislative Tracking in Focus

Transferring funds abroad is getting riskier: a look at how the tax dispute landscape evolved in 2022

In 2022, new trends shaped tax litigations over distributions to foreign persons, to name but a few:
  • more types of outbound payments were treated as passive income
  • withholding tax was increasingly charged at a 20-percent rate applicable to Other Income
  • payments for services that were not effectively rendered were treated as illegitimate foreign currency transaction
  • tax treaty benefits were disallowed on the mere account of ‘tax abuse’.

On top of that, mutual agreement procedures involving Russia nearly came to a halt.

Therefore, even if a taxpayer believes that the Russian taxation is inconsistent with the objectives and principles of a tax treaty, the dispute would be hard to solve at the transnational level.

We recommend thoroughly assessing the potential risks and their impact when planning any cross-border transactions, even with non-hostile states.