Law on deoffshorization: main provisions, history of adoption

Offshores refer to countries or separate regions that designate 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 "anti-offshore" law immediately in the second and third reading, and it is one of the ways to combat the outflow of capital. Owners of offshore companies will be required to notify their shares to the tax authorities, and otherwise they will be forcibly put on the register.

Despite the fact that the project regarding 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 "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 incorporating legal entity, owned by Russian tax residents.

By the second reading, the deputies tightened their ideas and proposals, reducing for 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 - to 25%.

Prior to that, the deputies were ready to introduce a transition period of two years.

The document also preserves the norm that those who have a share of more than 10% (the share is determined jointly with spouses and underage children for individuals) in the organization can be regarded as the controlling persons, if tax residents of the Russian Federation participate directly or indirectly in aggregate (50 %) in that organization.

From January 1, 2015, taxpayers will be required to report to the Department of the Federal Tax Service of their participation in international organizations (on the establishment of foreign institutions without incorporation of legal person), and the presence of controlled foreign companies.

Bearing responsibility for concealing their incomes in the offshore will only become effective after 2017. Fine of 100,000 rubles for each company is provided for failure to provide tax authorities with notification of the CFC or provision of false information.

Fine of 50,000 rubles will be imposed for similar violation due to participation in foreign organizations regarding each organization. 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, for failure to pay or incomplete payment to the tax authority.

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

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% should be payable to the Russian treasury