Treaty between Russia and Ukraine
Russian Ministry of Finance clarifies tax treatment of capital gains obtained by individual resident in Ukraine.
On 4 February 2013, the Ministry of Finance issued Letter No. 03-04-05/4-92 clarifying the tax treatment applicable on the capital gains obtained by an individual tax resident in Ukraine from sale of shares held in a Russian entity.
Income from alienation of shares in Russian entities obtained by individuals that are not resident in Russia is generally subject to taxation in Russia.
The Russia–Ukraine Income and Capital Tax Treaty (1995) does not contain provisions specifically addressing the taxation of income from sale of shares in a company.
At the same time, article 20 of the tax treaty provides that types of income sourced in Russia and not enumerated in the preceding articles of the tax treaty may be taxed in Russia.
Therefore, the Ministry of Finance concluded that, based on article 210 of the Tax Code, income derived from the sale of shares in a Russian legal entity by an individual resident in Ukraine is subject to Russian personal income tax at the rate of 30%.
The taxable base is determined as the total sale proceeds without the application of any tax allowances.