As from 1 January 2015 so called law on deoffshorization came into force. This legal act brought significant changes and amendments into Russian tax legislation (for example, set the rules on controlled foreign companies, provided the possibility of recognition of foreign companies as Russian tax residents, established the rules on beneficial owner of the profits and introduced several obligations on disclosure).
We are glad to offer you services in relation to completing the said legislation.
Submission of notifications on participation in foreign companies
Tax legislation obliges the taxpayers to notify on their participation in foreign companies (in case the interest of such participation exceeds 10 per cent) and on set up of foreign structures without legal entity.
- Preparation and submission of notifications on participation of individuals and legal entities – Russian tax residents in foreign companies and structures.
- Preparation and submission of notifications on incorporation of foreign structures without legal entity, on controlling such structures and receipt of actual profit.
Beneficial owner of the profit
Claim for beneficial owner of the profit is set in many double tax treaties entered into by the Russian Federation and its abidance is an important condition for implementation of reduced tax rate or complete exclusion when paying dividends, interest, royalties by the Russian company in favor of tax non-resident subject to such double tax treaty.
Specialty of claim for beneficial owner of the profit is that it has been introduced long ago. As a result, Russian tax authorities are able to check whether the requirements are met. You should bear in mind:
- The terms for field audit according to the general rule are 3 years;
- The amount of non-paid tax (not limited to penalties and fines) may be recovered from the tax agent (Russian company).
Id est the amount of additional charges might be material. Moreover the risk is applicable to past and future periods.
- Working out of criteria necessary for recognition of the company as actual beneficial owner of the profit;
- Assessment of meeting the requirement for actual beneficial owner of the profit for specific situation. Preparation of advice for possible measures for recognition of foreign company as actual beneficial owner of the profit;
- Drafting of confirmations on recognition of foreign company as actual beneficial owner of the profit;
- Examination of tax efficiency of applying of transparent approach for application of rules for actual beneficial owner of the profit.
You may find more information on rules for actual beneficial owner of the profit here.
The introduced legislative changes make it now possible to recognize foreign entities as Russian tax residents, which principal place of business is located in Russia.
- Assistance in voluntary recognition and registration of foreign entity as Russian tax resident.
- Preparation and submission of annual financial statements of foreign entity recognized as Russian tax resident.
- Calculation of tax efficiency from recognition of foreign entity as Russian tax resident.
- Improvement of management of foreign entities in the scope of risks for their recognition as Russian tax residents.
- Review of established by deoffshorization law exemptions/exceptions for recognition of foreign entity as Russian tax resident.
- Assistance in reconciliation procedure established by international tax treaty (if applicable) for setting the tax residency.
Controlled foreign entities
In case Russian tax resident (individual or legal entity) controls foreign company or structure (for example, a trust), accumulated profit of such foreign entity/structure may be taxed in Russia at the level of controlling person.
- Preparation and submission of notices on controlled foreign entities.
- Preparation of annual financial statements calculating the income of controlled foreign entities.
- Review of legitimacy of recognition of foreign entities/structures as controlled or non-controlled.
- Review of application of income tax exemptions of controlled foreign entities under rules of controlled foreign entities.
Entities directly or indirectly holding real estate in Russia
- Assistance to foreign entities/structures holding assets (treated as being taxable under article 374 of Tax Code of Russia) in provision to Russian tax authorities of information on members of such foreign entities (for foreign structure – information on its founders, beneficiaries and management).
- Review, estimation and preparation of advice for elimination of tax risks in order to comply with the law on deoffshorization.
- Working out of advice for change of ownership structure, financing and management for compliance with the law on deoffshorization.
- Assistance in implementation of various actions aimed at change of ownership structure by foreign entities to comply with the law on deoffshorization, including dissolution of foreign entities and transfer of assets to Russian companies.