Rep Office In Russia May Deduct Insurance Payments Made By Head Office In Germany

Letter of the Ministry of Finance #03-08-05 from April 27, 2012 explains how to deduct from the profit tax base insurance premium payments made in accordance with German legislation, transferred from the head office of a German company to its representation office in Russia.

The Ministry points out that, in accordance with Article 7 of the Double-Taxation Treaty between Russia and Germany from May 29, 1996, business profits are to be taxed only in the country of origin (Russia or Germany), except if the company conducts business in the signatory country through a permanent rep office, in which case  profits may be taxed in the other country, but only in the part related to the permanent rep office.

Article 7 Paragraph 3 of the Treaty states that, in calculating profits of the permanent representation office, expenses for the needs of this office, including managerial and general administrative expenses, are tax deductable, regardless of whether they were acquired in the country where the rep office is located, or in another location.

Taking into consideration all of the above, a German rep office in Russia has the right to deduct insurance premium payments made by the head office in accordance with German legislation, as are required for German citizens working in the rep office located in Russia.