East-West Church & Ministry Report
Vol. 2, No. 2, Spring 1994, Covering the Former Soviet Union and East Central Europe

Russian-American Tax Treaty Finalized

Lauren Homer

A new income-tax treaty between the United States and Russia became effective 16 December 1993, replacing a 1973 agreement.  The new "Convention for Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital" applies to all personal income received after 1 January 1994, with a few exceptions for investment income.  U.S. expatriates are subject to a Russian income-tax rate of approximately 40 percent unless they reside in Russia less than 183 days during any 365-day period, and their employer is not a resident of Russia, and their salary is not borne by a "permanent establishment" in Russia.  The treaty exempts U.S.-based income such as rents, interest, or profits from Russian tax, but it eliminates exemptions for participants in intergovernmental programs, teachers, and specialists, and some exemptions for researchers and trainees available under the 1973 treaty.  During 1994 taxpayers may elect to use the 1973 treaty, if it is more advantageous.  A copy of the treaty is available through the U.S. Government  Printing Office, Washington, DC 20402; tel:  202-783-3238, but it is meaningless without the Russian tax laws and related regulations, which contain complex income inclusions and exclusions applicable only to foreigners.  Consultation with legal counsel or a qualified accountant is recommended for specific issues.  The treaty provides for an exchange of information between U.S. and Russian tax-enforcement authorities to prevent tax evasion.  On 24 October 1993 the U.S. and Kazakhstan also signed a tax treaty, but it still awaits ratification. 

Editor's Note:
See also David R. Tillinghast and Ted Chastain, "Analysis of the New Income Tax Treaty Between the Russian Federation and the United States," Law of the C.I.S., The Bottom Line 5 (Winter 1994), 1-4.  For Law of the C.I.S. subscription information contact:  Chadbourne & Parke, 30 Rockefeller Plaza, New York, NY 10112; tel:  212-408-5100; fax:  212-541-5406; or 38 Maxim Gorky Naberezhnaya, Moscow 113035, Russia; tel:  7095-231-1064; fax:  7095-233-5298.

Attorney Lauren B. Homer has provided counsel on registration and other legal matters to a number of U.S.-based ministries and other nonprofit organizations working in Russia, Belarus, Ukraine, and Kazakhstan.  She recently formed her own firm, International Law Group, P.C., 7002 Little River Turnpike, Suite E, Annandale, VA 22003; tel:  703-256-2000; fax:  703-642-3841.  The firm, which also includes attorneys Tarik Radwan and Ann Buwalda, specializes in international legal counsel for Christian ministries and other nonprofit organizations.  Lauren Homer also heads the Law and Liberty Trust which serves as an advocate for legal reform and freedom of religion worldwide.

Lauren Homer, "Russian-American Tax Treaty Finalized," East-West Church & Ministry Report, 2 (Spring 1994), 4.

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1994 East-West Church and Ministry Report
ISSN 1069-5664

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