Cutting the tax rate for foreign companies related to the liquidation of Russian subsidiaries

Tax remissions for Russian business abroadA draft law, providing for tax breaks to subsidiaries located in Russia if their parent companies are registered abroad, has been registered in the State Duma of the Russian Federation.

In particular, the issue is referred to reducing the tax rate upon the liquidation of Russian subsidiaries.


The main innovations stipulated by the draft law involve the possibility to reject the status of “beneficial owner of income” for a foreign company.

Also, the draft law provides for the reduction of the tax burden for an investor when leaving a company as well as expanding the usage of “cross-cutting approach”. This approach encompasses the application of preferential tax rates with respect to the final beneficiary entitled to such income, not to the direct beneficiary.

Let us remind you that changes in the legislative field of taxation associated with “deoffshorization” were introduced into action as from January 1, 2015. According to them, the tax rate can be reduced only to those firms which operate directly between the Russian Federation and those countries with which there are relevant agreements. If the final beneficiary is an intermediary, it can not be entitled to preferential tax regime. The Federal Tax Service closely monitors the activities of companies and appreciate the circumstances under which such company was established, controls cash flows, financial transactions, etc.

If the Federal Tax Service finds out that the company was created with the purpose of avoiding taxes, the use of benefits is unacceptable. In such cases, requalification of the purpose of the transaction takes place, and the tax rate increases in accordance with the law.

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