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Explanation of taxation on dividend income from Sistema shares

On 25 June 2016, Sistema’s Annual General Meeting of Shareholders resolved to distribute RUB 6,465,500,000 in dividends for 2015, which corresponds to RUB 0.67 per ordinary share (or RUB 13.4 per depositary receipt). The record date was set for 14 July 2016.

Distribution of dividends to Russian tax residents (individual and corporate)

Distribution of dividends on Sistema shares for 2015 to individuals and legal entities qualifying as Russian tax residents as of the date of such distribution entails no obligation to withhold tax on dividend income (as per clause 5 of article 275 of the Tax Code of the Russian Federation).

For any questions about whether it is necessary to confirm your tax residency and/or what procedures to follow to that end, please contact your tax agent.

Distribution of dividends to non-Russian tax residents (individual and corporate)

Distribution of dividends on Sistema shares for 2015 to individuals and legal entities not qualifying as Russian tax residents as of the date of such distribution entails an obligation to withhold tax on dividend income at a standard domestic rate. Reduced tax rates may apply in certain circumstances.

For any questions about documents to be filed to confirm eligibility for a reduced tax rate under the tax treaties (if applicable) please contact your tax agent.

Distribution of dividends on global depositary receipts (GDRs) to individual and corporate holders

GDRs are recorded on special depositary accounts that can only be opened by Russian depositaries that have nominee accounts with National Securities Depository, Russia’s central securities depository.

Taxation procedures applying to distribution of dividends on GDRs are similar to those applying to distribution of dividends on ordinary shares.

For any questions about whether it is necessary to confirm your tax residency and/or what procedures to follow to that end and/or documents to be filed to confirm eligibility for a reduced tax rate under the tax treaties (if applicable) please contact your tax agent.

Sistema PJSFC as tax agent

According to Russian tax law, Sistema qualifies as a tax agent when distributing dividends on shares recorded as of the record date on the following accounts of a securities register:

  • owner's personal account;
  • personal account opened for deposit purposes in the case of legal entities entitled to receive securities from such account;
  • account of an unidentified person in the case of legal entities with confirmed right to receive such income;
  • trustee's personal account, unless the trustee is a securities market professional.

Other tax agents (nominees)

If as of the record date shares are recorded on a trustee's personal account, trustee's depositary account, or a depositary account (sub-account), the following qualify as tax agents at the time of dividend distribution:

1) trustee acting with regard to dividend distribution on shares issued by a Russian company and recorded as of the record date on this trustee's personal account or depositary account, if such trustee is a securities market professional as of the date of acquisition of such shares;

2) depositary distributing dividends on shares issued by a Russian company and recorded as of the record date on the following accounts of such depositary:

  • depositary account of the owner of such securities, including dealing accounts;
  • account of an unidentified person opened in such depositary for a company with confirmed right to receive such income;
  • depositary account of a foreign nominee;
  • depositary account of a foreign chartered holder;
  • depositary account opened for depositary programmes (for recording GDRs);
  • depositary account opened for deposit purposes in the case of legal entities entitled to receive securities from such account;
  • depositary sub-account opened in a depositary in accordance with Federal Act dated 7 February 2011, No.7-FZ Concerning Clearing & Clearing Activities, except for nominee depositary sub-accounts;
  • depositary sub-account opened in accordance with Federal Act dated 29 November 2001, No.156-FZ Concerning Investment Funds.

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