Deoffshorization in Russia. Law on CFC

On November 18, the State Duma of the Russian Federation adopted the Law "On Amending Part One and Two of the Tax Code of the Russian Federation (regarding the taxation of the profits of controlled foreign companies and the incomes of foreign organizations)" in the second and third reading, and although there is no such word as "deoffshorization" in the title and text of the law, but in fact the new law, following the example of the laws of many other countries, including the USA, is aimed at reducing the outflow of capital and transferring it to the budget.

So far, it is not forbidden for Russian residents to register companies in offshore jurisdictions, but the use of an offshore company to pay taxes at a reduced rate, which is offered by such jurisdictions, is becoming much more complicated.

In fact, deoffshorization is a common world trend, and in the context of sanctions, the fall of the ruble and oil prices, it seems logical to adopt such a law that would direct the flows of money to the budget. According to preliminary calculations, the budget can receive up to 5-6 billion dollars within the year due to the new law.

However, there is another side. In the present conditions of outflow of foreign investments and the fall of the national currency, the additional tax burden will at least become a setback for economic growth, and it will be impossible for some companies to be profitable after paying all the new tax liabilities.

Immediately after the adoption of the law, the Ministry of Finance announced that by spring it will consider options to soften the law, but so far it is worthwhile to focus on the existing text, since it is not known when these promises will be fulfilled and whether they will be fulfilled at all.

The new law will enter into force on January 1, 2015, and it obliges to declare incomes of individuals and legal entities that control foreign companies in fiscal bodies. The minimum amount of profit for 2015 is set at 50 million rubles, but over time this threshold will be lower - 30 million rubles in 2016 and 10 million rubles after 2017.

Similarly, the law introduces such new concepts as "Controlling person" and "Controlled foreign company." The controlling person is a citizen who, together with spouses and underage children, owns more than 50% of the company's capital, as well as a citizen who together with spouses and underage children own more than 10% of the company's capital, more than half owned by tax residents of the Russian Federation.

Similar rules apply to legal entities that participate in the capital of foreign companies. Since 2016, the share of a controlling person in a foreign company will decrease from 50% to 25%. As for the concept of a controlled foreign company, it means an organization or structure without the formation of a legal entity, which is not a tax resident of the Russian Federation itself, but is controlled by them.

Proceeding from the foregoing it follows that if 50% of the ownership of a foreign company is registered for you (in conjunction with spouses and underage children), or 10% of the company, more than half of which belongs to residents of the Russian Federation, then it is necessary to file information about this with the tax authorities.

If a citizen decides not to report to the tax authority about the presence of a controlling interest in a foreign company, new law proposes to impose a fine of 100 thousand rubles for each company. And all this in addition to the existing criminal responsibility for tax evasion, to which the offender will also be subject.

By the way, it is necessary to quote figures in order to give an opportunity to understand the scale of the issue: in offshore jurisdictions, there are about 36 trillion dollars of assets. This corresponds to the total value of all dollar reserves of all world central banks.

This is more than the total GDP of the US and China. There is no more than a trillion of Russian money, and although, according to the scale of the total amount of assets, this is not so much, but this amount is significant for Russia.

After getting acquainted with the innovations, the first thought, of course, may be: how will the fiscal bodies receive information on non-residents, because the law of the Russian Federation can oblige its citizens to file information, but regarding foreign jurisdictions - it is impossible to oblige to disclose all beneficial owners and shareholders?

On the one hand, it is impossible, but the 7th Global Forum on Transparency and Information Exchange for Tax Purposes took place in Berlin in October, where representatives from 51 countries signed an agreement providing for an annual automatic exchange of data on non-resident accounts, and Russia announced its intention to access to this agreement.

Thus, information will be provided even on demand, but automatically.

In addition, international agreements on cooperation in civil and criminal cases with a large number of countries (Latvia, Lithuania, Estonia, Hungary, Cyprus, France, etc.) are already in place, within the framework of which there is an exchange of information in the field of combating violations of the tax legislation.

Moreover, the exchange of information on beneficial owners between states can occur on the principle of reciprocity and simply a leak of information can provide fiscal authorities with everything necessary. Therefore, one should not hope that simply ignoring the requirement to submit information to the tax service will relieve of the responsibility and additional tax burden.

However, there have always been ways of circumventing any, even the most stringent, legislation throughout the history of combating offshores or trying to cover up the possibility of using other jurisdictions to withdraw capital or minimize taxes, and this case is no exception.

The new law was unexpectedly beneficial for companies that provide services for obtaining a second passport. They offer to register all non-resident companies with the second passport (St. Kitts, Grenada, Dominica, etc.), but since the cost of such a passport starts from 500,000 dollars, we do not even stop at this option, since it is strange to offer a solution that can cost more than what we want to avoid using this solution.

Of course, at this stage there is no one universal way to circumvent the consequences of the new law, which could be suitable for any activity in any jurisdiction, it is not for nothing that many experts worked on the law in an attempt to chop off all the old algorithms. But there is always a way out, even from the most difficult situations, although now every particular case needs to be considered separately to find an individual solution.

There are legal companies for such purposes that provide services for registration, maintaining foreign companies and tax planning, and, after considering each individual case, they will be able to find proper and due solution.

As a result, it should be noted that offshore jurisdictions have already existed for many years and the rules for regulating their activities and disclosing information are constantly changing and supplementing, since any country does not want to allow money flows to tax havens where they can not be traced, but there are always ways to adapt to the new rules.