It is not a striking office, but it is a thorn in the side of the Kremlin. The headquarters of the Russian internet giant Yandex is hidden on Schiphol Boulevard. At least, the tech company’s tax headquarters. Because the real decisions fall in a hypermodern building in the heart of Moscow, a stone’s throw from the Moskva River. The fact that Yandex also has offices in the municipality of Haarlemmermeer has only one reason: tax. Or rather, avoiding it.
Because although Yandex is a great unknown to the Dutch public, no one in Russia can ignore the company. In addition to being Russia’s main search engine, Yandex also delivers meals and groceries at home, Russians can shop online at the tech giant, listen to their music via the company’s streaming service, and bright yellow Yandex taxis drive residents of Russian metropolises through their cities. Google, Amazon and Uber in one.
A whopping three billion dollars
Last year Yandex converted a sloppy three billion dollars. Yet the Russian state sees little of that. Mainly because the company is financially based in the Netherlands. But if it is up to the Kremlin, that will soon change.
Last Friday, the Russian state news agency Interfax reported that the Ministry of Finance in Moscow wants to cancel the tax treaty with the Netherlands. Under the current treaty, Russia does not levy withholding tax on interest and dividend payments that end up outside Russia. In short, if they already do this in the Netherlands, Russian companies that have their offices here do not have to pay money to the Russian tax authorities.
Ways to fill the treasury
For a long time the Kremlin could live with that, but now that the oil price is low and the corona crisis is also putting pressure on the Kremlin’s budget, the government in Moscow is looking for other ways to fill the state’s coffers. President Putin therefore announced in March that Russia wants to levy a 15 percent tax on dividends that flow abroad from next year.
That is why the Russian finance ministry started negotiations with The Hague in August to break open the current tax treaty between the two countries. However, those negotiations stalled for unknown reasons, Interfax reported. Moscow is now threatening to unilaterally inflate the agreement. The bill to realize this is now in the Duma. Should it pass, the treaty will expire in March next year.
Setback
This would be a setback for the Dutch government, as it is emphatically committed to a favorable business climate for foreign companies due to the assumed additional employment. In addition to Yandex, the Russian gas giant Gazprom and the X5 Retail Group, which owns various supermarket chains in Russia, also have offices in the Netherlands for tax reasons.
The Kremlin has been in the stomach for a while with this tax avoidance. Since 2014, Russia has been struggling with a huge capital flight, partly due to sanctions imposed by the West following the annexation of Crimea that year. For example, in 2018 a net amount of $ 67.5 billion flowed from Russia abroad. Four years earlier that was even more than 150 billion dollars. Due to the mild tax climate, the Netherlands is a popular destination for those Russian rubles: between 2017 and 2019 at least 15.5 billion dollars flowed from Russia to the Netherlands.
Incidentally, the Netherlands is not the only country that Russia is targeting. Tax treaties with other countries are also being revised. According to Interfax, negotiations for a new agreement with Cyprus, Luxembourg and Malta have now been successful. The Russians are still sitting around the table with Switzerland and Hong Kong.
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