The State Duma adopted anti-offshore law. Will it be effective?

When did offshores appear?

Offshores refer to countries or separate regions that designate and provide for tax and other benefits for foreign enterprises in return for providing jobs to the local population and attracting international capital. Offshores became an obvious fact in the middle of the twentieth century, but the phenomenon is not new.

The State Duma adopted immediately in the second and third reading an "anti-offshore" law, that is one of the ways to combat the outflow of capital. Owners of offshore companies will be forced to notify the tax authorities of their shares, and otherwise they will be compulsory put into register. Despite the fact that the project on deoffshorization was introduced by representatives of all Duma factions, and its content was in line with the last position of the Ministry of Finance, the deputies decided to tighten the document.

The terms of "controlled foreign company" (CFC) and "controlling person" should be included in the Tax Code. The list of CFC will include foreign organizations that are not residents of the Russian Federation but are controlled by Russians, as well as foreign structures without a legal entity, owned by Russian tax residents.

By the second reading, the deputies tightened their ideas, reducing by one year, until 2016, the period during which the legal entity or individual, whose share in the organization is more than 50%, will be the controlling person. After that, the stake of participation in the company will be halved - up to 25%. Prior to that, the deputies were ready to introduce a transition period of two years. The document also preserves the rule that those who have a share of more than 10% (for individuals, the share is determined jointly with spouses and underage children) in the organization can be referred to the number of controlling persons, if tax residents of the Russian Federation have total direct or indirect participation (50 %) in it.

From January 1, 2015, taxpayers will be required to report to the Department of the Federal Tax Service about their participation in foreign organizations (on the establishment of foreign structures without the formation of a legal entity) and on the availability of controlled foreign companies. The responsibility for concealing their incomes in the offshores will only be born after 2017. For failure to provide tax authorities with notification of the CFC or provision of false information, a fine of 100,000 rubles is provided for each company. The fine will be 50,000 rubles for a similar violation due to participation in foreign organizations in respect to each organization. For failure to pay or incomplete payment to the tax authority, a fine of 20% of the amount of unpaid tax will be levied on the profits of the controlled foreign company, but not less than 100,000 rubles.

Even when discussing the document in the first reading, the head of the Duma Committee on Budget and Taxes noted that "this is a law-proposal and a law-warning." "You know the conditions, what duties are assigned to you, make a choice, or responsibility will be inevitable," he said. His colleagues voted to adopt this document.

Its essence is simple. For the time being, nobody forbids Russians to register firms in tax havens. The bill also does not oblige to double taxation. If certain tax option in Russia is 10%, and in offshore - 5%, please pay there. But the remaining 5% is payable to the Russian treasury.