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. Last Updated: 07/27/2016

Pickering: No Tax Breaks Till '95

The U. S. -Russian double taxation treaty, which would give favorable tax treatment to U. S. companies in Russia, may not take effect until 1995 because its fate is linked to another treaty, U. S. Ambassador Thomas Pickering said Thursday.


Pickering told The Moscow Times at an oil industry conference in Moscow that the United States wants the double-taxation treaty enacted at the same time as a separate bilateral investment treaty.


The tax treaty has now received all the necessary Russian and American approvals but the investment accord, which sets out a framework for increasing investment in Russia, must be approved by the new Russian parliament.


"Realistically, the Russian parliament is not due to meet until 30 days after the elections", Pickering said, indicating that the chances for enactment of both treaties is unlikely this year.


The treaty takes effect on the first January after documents are exchanged. Under the tax treaty's provisions, unless the treaty documents are exchanged before the end of the year, it will not become effective until Jan. 1, 1995.


The tax treaty would provide companies with 30 percent U. S. ownership and at least $100, 000 of startup capital the ability to deduct interest and salary expenses, which is now extremely limited under Russian law. It would also give U. S. individuals relief from paying Russian taxes on incomes outside of Russia.


A U. S. State Department official in Washington said Wednesday that the United States hoped the treaty documents would be exchanged when Vice President Albert Gore Jr. visits Moscow later this month.


If implemented in the absence of similar agreements with other nations, the treaty would give U. S. companies a distinct advantage in Russia over their foreign competitors. At least three other Western nations France, Germany and Britain are hoping to sign their own treaties soon.


"We are negotiating now", said Olivier Louis, minister for commercial and economic affairs at the French Embassy. "We would like to have the same treatment as the Americans. Usually these kinds of agreements are the same for all the countries".


Louis said that he did not expect France and Russia to complete a new treaty before 1994, and any agreement would have to wait for ratification until the French Parliament reconvenes in March.


Officials at the German and British embassies confirmed that they had been in negotiations with Russia for new double-taxation agreements. Yaroslav Kucherev, commercial assistant at the British Embassy, said that a new U. K. -Russia treaty was "very close to being finalized".


Japan, while it does not have any plans for a new treaty, would not look favorably upon preferential treatment for the United States, a source in that country's embassy said.


"It's not a very normal situation that one country gets a special advantage and tax treatment", the source said. "We have to see the treaty closely and decide what to do".