Moscow, Russia

The OECD’s Multilateral Instrument (MLI): An Update from Russia

By Valeria Khmelevskaya, KBK Accounting

Beginning from 2021, Russia has started actual application of MLI in relation to 27 nations: among them Austria, Belgium, Denmark, and some other European countries. At the same time, Russia shall not apply MLI to Germany or Switzerland and it is likely that the relevant double taxation treaties (DTT) with these countries shall be extended and revised at the bilateral level. In the case of Switzerland, the benefits might be reduced in a similar way as with Malta, Luxembourg, Cyprus, etc. (non-application of participation exemption regarding dividends and withholding tax on interest). Unlike Switzerland, Germany shall not suffer such limitation of benefits as one of Russia’s significant trade partners.

Unlike the DTTs, MLI aims at simultaneous updating of a number of DTTs with anti-abuse rules without actually changing their wording. Each MLI member state may opt for certain provisions and when the choice of the parties coincides, the corresponding DTT is subject to review and update as selected by both parties (OECD matching table – mli-matching-database.htm). At the same time, if the choices of the parties do not coincide, the minimum standard shall be applicable in any case. This standard includes (1) antiabuse rules, and (2) amendments to the provisions setting forth the DTT purpose and the provisions regarding mutual agreement procedures.

Russia has chosen to apply:

Principal Purpose Test (PPT)

Being a part of the minimum standard, it allows national tax authorities to refuse DTT benefits if the application of such benefits is the principal or one of the principal purposes of structuring transactions. If Russian national law requires that tax benefit should not be the principal purpose, then the PPT under the MLI, contains a more stringent requirement; even if tax benefit were only one of the principal purposes, the benefit shall not be applied.

PPT Plus Simplified Limitation of Benefits (S-LOB)

According to this rule, PPT shall be applied with a limitation concerning the recipients: only qualified persons shall enjoy benefits under DTTs. S-LOB is applicable to many DTTs with European countries such as Norway, Denmark, Greece, Bulgaria, Iceland, and Slovakia; this might cause practical complications when applying the benefits, as well as require additional effort for preparing defence files confirming the compliance with S-LOB requirements.

Valeria Khmelevskaya

Valeria Khmelevskaya

GGI member firm
KBK Accounting
Auditing & Accounting, Tax
Moscow, Russia
T: +7 495 662 33 30
E: This email address is being protected from spambots. You need JavaScript enabled to view it.

KBK Accounting is a reputable outsourcing firm and provider of a wide range of services, including tax accounting and bookkeeping, tax advisory, reporting and compliance, HR, and interim management.

Valeria Khmelevskayais a Partner, Lawyer, and Tax Consultant admitted to practice in Russia. She has over 20 years of experience of consulting in matters of Russian and international tax law. Ms. Khmelevskaya is also the Deputy Head of the Management Board and the Chair of the Committee for Taxes and Financial Reporting of the German-Russian Chamber of Commerce (AHK) and recommended attorney of the Austrian Foreign Trade Centre Moscow (Advantage Austria).

Published: International Taxation Newsletter, No. 14, Spring 2021 l Photo: Pavel Burchenko -


Ggi Logo 150x109px

GGI Global Alliance AG

Sihlbruggstrasse 140
6340 Baar


T: +41 41 7252500
F: +41 41 7252501
This email address is being protected from spambots. You need JavaScript enabled to view it.