Peculiarities of the new requirement of the Ministry of Finance regarding offshore companies

The Ministry of Finance requires the certificate on the right to income from offshore companies

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Experts consider that this requirement of the financial department was put forward with view to combating offshore and "transit" schemes.

The requirement will be applied to all foreign companies receiving income from Russian counterparties. These companies will be required to provide set of prepared documents for the Federal Tax Service of Russia, proving that offshore company is not the subsequent part in the "transit" capital flow schemes.

Otherwise, if the company can not prove that the offshore company "has the right to income", it will loose tax benefits guaranteed to it by treaties on avoidance of double taxation.

According to the opinion of the same experts, person will be recognized as the actual recipient of income, if this person is immediate gain acquirer, in other words, he should gain advantage from income and determine its further economic destiny.

The actual recipient of income is also determined by taking into account the functions performed and the risks accepted by the foreign organization, which claims to receive benefits in accordance with international treaties on avoidance of double taxation.

Foreign company shall obligatory provide:

• Data on owners and beneficial owners, as well as confirming documents of doing business activities in their country and obtaining income due to the foregoing activities and paying taxes;
• It is necessary to provide supporting documents of the fact that the management of such companies (company) is entitled to independently dispose of the amounts transferred to it.

The Tax Code of the Russian Federation does not include the exact range/list of specific documents necessary to determine the actual recipient of income, which once again confirms the fact that the legislator does not restrict tax agents by any list, preferring the content of the information received by the tax agent.

Past year can be noted by number of successful court proceedings for tax authorities, in which it was proved that Russian counterparties have no right to enjoy benefits because "transit companies" through which money flows pass "do not have right to income."

In contrast to the tax authorities, payers (payer) of passive income can not oblige foreign independent income recipients to disclose such array of information, because it is beyond their legal relationships. This position has the right to exist when paying the dividends, but it is disproportionate and illegal when there are requirements concerning interest payments on loans and royalties.

It should be noted that Russian counterparties can be deceived by foreigners, and in this case Russian organizations will not be subject to punishments in the Russian Federation.
You can clarify additional questions concerning the current issue with our lawyers of Law&Trust International by phone, in chat or during personal conversation in the office of the company.