China asks Russia to lower the tax on dividends for the Chinese participants of the Yamal LNG project. Proceeding from existing agreements, Chinese CNPC and SRF must pay at a rate of 10%, while another foreign participant - Total - is entitled to 5%. Such a situation may result in a loss of profits for Chinese shareholders of tens or even hundreds of millions of dollars a year. If Beijing succeeds, not only Yamal LNG shareholders, but other Chinese investors working in the Russian Federation can win.

Kommersant sources told Kommersant that the protocol of the Russian-Chinese intergovernmental commission on energy, meeting of which was held on September 20, recorded Beijing's request to the Russian government to reduce the tax on dividends for the Chinese participants of the Yamal LNG project. The essence of the problem is that, as of now, foreign participants in the project will pay tax on dividends at different rates: Total - 5%, Chinese investors - 10%.

According to the law, foreign companies pay a dividend tax at a rate of 15% or otherwise, if this is provided for by the agreement on avoidance of double taxation with the country of origin of the investor. Under the agreement between Russia and France, it is enough to invest more than 500 thousand francs in order to get a 5% stake. The contract with China assumes that for an interest rate of 5%, the investor must not only invest at least € 80 thousand, but also own at least 25% in the project. The last condition for the Chinese shareholders of Yamal LNG is not fulfilled. According to Kommersant's interlocutors, Beijing wants the tax rate to be lowered to the level of Total.

The apparatus of First Deputy Prime Minister Igor Shuvalov declined to comment. The Finance Ministry told Kommersant that such proposals have not yet been submitted to the ministry. In NOVATEK and Total did not comment on the topic, noting that it concerns interstate issues.

Yamal LNG is a liquefied gas production project based on the South Tambeyskoye field, shareholders are NOVATEK (50.1%), French Total (20%), Chinese CNPC (20%) and Silk Road Fund (SRF, 9.9% %). The launch of the first stage is scheduled for November, at full capacity of 16.5 million tons of LNG per year, the project will be released in 2019. The project cost is $ 27 billion.

The difference in tax rates on dividends may result in a loss of substantial amounts for Chinese companies. According to Andrey Polishchuk from Raiffeisenbank, Yamal LNG will receive a net cash flow as early as 2018 at a rate of about $ 1.5 billion, which could theoretically be aimed at dividends. However, according to Kommersant's interlocutors in the industry, in the first years of the project, its shareholders are likely to extinguish previously issued loans by themselves and return the money in this way, rather than through dividends that will be small or nonexistent.

By 2022-2023, all loans of shareholders will be returned, and dividends will be the only way to distribute the profits of Yamal LNG. With an oil price of $ 65 per barrel, Yamal LNG in 2022, according to Andrei Polishchuk, can distribute about $ 5 billion in dividends, of which $ 1.5 billion will be paid to Chinese investors. In this case, their losses due to a higher tax on dividends can be about $ 75 million per year, which will turn into a much larger amount if you extrapolate the situation for 30 years of life of the project. The exact calculation can not be made, because it depends on the size of the profit of Yamal LNG, which, in turn, is tied to the dynamics of oil prices.

If Russia goes to meet the Chinese side, changes in the tax regime will affect in any case not only Yamal LNG. The change in the tax rate on dividends is possible only through the adjustment of the Russia-China treaty on avoidance of double taxation, since international agreements take precedence over domestic law, Alexander Ovesnov, head of the practice of tax disputes at the MEF-Audit, notes. It is hardly possible to establish tax rates for specific companies (this would contradict the general principles of taxation), he adds, but in the framework of a certain type of economic activity, the establishment of special tax rates is theoretically possible.