The Russian Ministry of Finance has published Letter No. 03-08-05/10372 of 19 February 2019 concerning the application of the reduced withholding tax rate provided under the 1993 tax treaty with Sweden. The letter notes that under the treaty, a 5% withholding tax rate applies on dividends where the beneficial owner owns 100% of the paying company's capital, or 30% ownership in the case of a joint venture, and the invested capital is not less than USD 100,000 or equivalent at the time of distribution. The letter provides that for Russia, the meaning of a joint venture is based on the applicable legislation at the time the treaty was signed, which was the Law on Foreign Investments in the USSR that was approved in 1991 and continued to apply until the enactment of the new Law on Foreign Investments in Russia in 1999. Based on this, the meaning of a joint venture means an enterprise with the participation of foreign investors, created, inter alia, in the form of a joint stock company. Further, the letter clarifies that in determining if the USD 100,000 invested capital condition is met, the contribution at the actual time of investment is taken into account and is equal to the amount actually paid at the date of acquisition, without subsequent recalculation due to fluctuations in exchange rates.
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