Doing Business with Russia in the New Era: How to Overcome Suspended Double Taxation Agreements

Following the outbreak of hostilities in Ukraine, the international tax landscape has undergone tectonic changes. Many international agreements between Russia and other countries, particularly Western ones, have ceased to apply or have been significantly suspended. This situation has created serious challenges for international companies, but has also opened new strategic solutions, with Serbia standing out as a key hub for business optimization.

Suspended agreements: Which countries are affected?

According to official data and decrees, the Russian Federation suspended or terminated double taxation avoidance agreements with a number of countries between 2022 and 2024.

The full list of 38 countries as of August 2023 includes: Australia, Austria, Albania, Belgium, Bulgaria, the United Kingdom, Hungary, Germany, Greece, Denmark, Ireland, Iceland, Italy, Spain, Canada, Cyprus, Lithuania, Luxembourg, Malta, New Zealand, Norway, Poland, Portugal, South Korea, Romania, North Macedonia, Singapore, Slovakia, Slovenia, the United States, Finland, France, Croatia, Sweden, Switzerland, Montenegro, the Czech Republic, and Japan.

Impact on business: A sharp increase in tax burdens

These changes are not merely administrative; they have a direct and significant impact on corporate profitability. The most affected are:

• Companies distributing films and copyrights

• Firms collecting royalties (license and intellectual property fees) in Russia

• Companies with owners in Western countries that paid dividends to parent entities

These organizations now face significantly higher tax payments both in Russia and in their home jurisdictions, as they can no longer benefit from double taxation treaties.

Solution: Serbia as a strategic business bridge

For many Western companies, there is an efficient and legal solution. Structuring operations through Serbia can significantly reduce tax burdens.

Serbia has maintained a neutral position and valid double taxation treaties with both the Russian Federation and most Western countries. The solution lies in incorporating Serbian legal entities into the flow of contracts between Western and Russian companies.

By restructuring the business model and using a Serbian company as an intermediary for royalties, dividends, or services, it is possible to optimize tax burdens again and enable smooth capital flow.

This is a general solution and requires detailed planning, taking into account Russian, Serbian, and Western legal and tax frameworks.

In cooperation with our partners across various jurisdictions, we help implement these solutions while ensuring full compliance and maximum efficiency.

Do not let global changes jeopardize your profits. Contact our team of experts and schedule a consultation to create a model tailored to your business.