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Russia ratifies MLI

19 July 2019

The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting of 24 November 2016 - also known as the Multilateral Instrument (MLI) - was drafted by an ad hoc group of the Organisation for Economic Cooperation and Development (OECD) within the framework of the Base Erosion and Profit Shifting (BEPS) Action Plan.

Ratification by Russia

The MLI was opened for signature on 31 December 2016 and signed by Russia at the 7 June 2017 OECD Ministerial Council meeting in Paris. However, since the M LI contains a number of rules which did not exist under Russian law, it was subject to ratification. In this regard, Federal Law 79-FZ on the Ratification of the Convention was adopted on 1 May 2019 and entered into force on 12 May 2019.

The MLI will enter into force once the OECD has been notified of its ratification via Federal Law 79-FZ and the three-month period provided for by the entry into force procedure has expired. In addition, if the MLI comes into force in 2019, the provisions relating to tax payments which are withheld at source will be applied from the beginning of the new tax period (ie, 1 January 2020), but only to the double tax avoidance agreements (DTAAs) which Russia has with jurisdictions that have ratified the MLI by that date. To date, the MLI has been ratified by Austria, France, the United Kingdom, the Netherlands, Israel, Ireland, Singapore, Malta and Finland, among other countries.


The MLI's entry into force will change to the taxation procedure for transactions with counterparties from a large number of countries that have concluded DTAAs with Russia. The main purpose of the MLI is to counteract the abuse of interstate DTAAs through which profits are purposely shifted to a state where they are not taxed or are taxed at a reduced rate. Such abuse has significantly reduced the Russian budget in terms of taxes, particularly corporate tax.

The MLI will apply to only 70 of the more than 80 DTAAs that Russia has concluded with foreign countries and will not apply to agreements with countries that are not members of the abovementioned OECD ad hoc group.

The MLI provides a minimum standard that is mandatory for all signatories, including:

  • rules to prevent the abuse of DTAAs; and
  • an amendment to the DTAA provisions on mutual agreement procedures.

The MLI also contains optional clauses which may be applied at a signatory country's discretion.


In determining the MLI's applicability to relationships with a party from a country with which Russia has concluded a DTAA, it should be verified whether the other party to the DTAA has signed the MLI. If the country has signed the MLI, it will also be necessary to ascertain whether it has included Russia in the list of jurisdictions to which the MLI applies. For example, Russia has included in its list countries such as Belarus and the United States, which have yet to sign the MLI. This means that Russia's DTAAs with such countries will not be covered by the MLI.