Russian Federation: Compliant Tax Structuring For The Russian Elite: Global Transparency And Domestic Law Changes

Last Updated: 7 April 2016
Article by Olga Boltenko

The age of global tax transparency is upon us. Clients have to be prepared for the fact that their international private and corporate arrangements will not remain confidential, for one reason or another. This poses the question of what to do?  

This brief article explains the recent legislative changes, which pose a threat to the status quo of some structures, and also proposes steps forward. Ensuring the right balance between maintaining the confidentiality of wealth structures, and complying with global transparency standards, has become the number one priority, and requires immediate attention.

Tax transparency  

Russia will participate in the global automatic information exchange programme and has committed to implement the Common Reporting Standard (CRS) and undertake the first exchange of information in 2018.

The basic legal document devoted to mutual tax cooperation between jurisdictions is the Convention on Mutual Administrative Assistance in Tax Matters that is in force for Russia and more than 90 other countries, including offshore jurisdictions like BVI, Cayman Islands and Belize. As of now, this Convention, together with double tax treaties, constitutes the basis for the Russian tax authorities to obtain information on request (as per the letter of the Russian tax services of 22 December 2015 № OA-4-17/22482@).

In order to receive international tax information automatically, Russia still has to join the automatic exchange legal framework, i.e. to sign the CRS Multilateral Competent Authority Agreement or other bilateral agreements. Under CRS, foreign bank accounts (balances and income) or all assets of foreign companies or trusts controlled by Russian resident individuals will be reported to the Russian authorities by the states responsible for the reporting. It is expected that reporting under CRS to Russia will start in 2018. However, it is important that, depending on their jurisdiction, banks, other financial institution and service providers already have an obligation to obtain information on their clients (including tax residence) for the period of 2016.

Voluntary disclosure prolongation until 30 June 2016

At the end of 2015 the President of Russia proposed extending the voluntary disclosure program and amending its conditions in order to make it more attractive. The program has been extended until 30 June 2016 (the Law of 29 December 2015 #401-FZ). A number of important amendments have recently been approved by the Parliament and are waiting for the Presidents sign off, including the abolishment of assets repatriation requirement, prolongation of guaranteed period for disclosed foreign bank accounts until the date of declaration and extension of the program's guaranties on the assets of CFCs. 

Further changes to CFC rules – trusts/foundations in focus

The law of 15 February 2016 #32-FZ (hereinafter, 'the Law') introduced several important amendments that clarify CFC tax and reporting consequences for trusts and other non-corporate structures.

  • First, beneficiaries and other controlling persons of the structure, except for the settlor, do not have an obligation to notify the tax authorities about participation in foreign non-corporate structures.
  • Second, assets received by a structure from the settlor or his/her immediate relatives or other controlled company (subject to certain conditions) should not be included in the CFC's income.
  • Thirdly, income received by beneficiaries of non-corporate structures within the amount of assets transferred to the structure by the settlor or other persons as noted above, should not be taxed under certain conditions.

These changes are positive signs and improve the tax position of the trusts and other non-corporate structures used by Russian families. Most of all, they bring the best international practices to wealth planning for Russians, and help to clarify issues surrounding the tax position in Russia as it was just a few months ago.  

As expected, the Law also introduces amendments aimed at simplifying the calculation of CFC profits. The most important change is that CFC tax can now be determined based on the financial reporting prepared in accordance with domestic reporting standards or, in the absence of such local standards, in accordance with international reporting standards irrespective of the jurisdiction where the CFC is registered. However, in the event that the CFC is not registered in a tax treaty jurisdiction (e.g. in BVI), financial reporting should be audited.

It is also important for a number of clients to bear in mind that there is still a possibility to liquidate foreign companies and structures without incurring tax consequences. The deadline for liquidation has been extended to 1 January 2018.

Currency control

Russian residents are very limited in relation to operations on their accounts in foreign banks due to the strict provisions of the Russian currency control regulations and new reporting obligations. As a result of the recent campaign on relaxation of the currency control rules, the Government introduced the new law of 28 November 2015 #350-FZ, under which the scope of permitted transactions was extended to include two additional transactions on personal accounts opened in banks located in FATF member states:

  • proceeds from the disposal of foreign listed securities can be credited directly to foreign bank accounts (in effect only starting from the 1 January 2018).
  • income received from investments under foreign discretionary management can already be credited to foreign bank account from 2016 onwards.

Although the definition of 'discretionary management', as well as the wording of the new provision, are subject to interpretation, this is a positive development and is currently being considered by a number of clients with large investment portfolios held with foreign banks.

What we can do to help you

Our clients are starting to talk to us about the impact of CRS on their structures, in order to be able to prepare themselves and avoid surprises.

Trustees of a foreign trust (or a foundation) with Russian resident settlors, beneficiaries or controlling persons, or directors of a foreign company holding Russian assets or controlled by Russian persons are required to re-assess their position and the risks associated with the structures/companies they manage in the context of the new changes and should also seek appropriate advice.

We are currently advising clients on the following:

  • existing structures controlled by Russian tax residents - identifying the reporting institution and scope of CRS reporting, supporting voluntary disclosure and restructuring (where relevant)
  • new structures –analysing and comparing the alternative scope of CRS disclosure and integrated advice in the context of Russian CFC
  • reviewing trust and foundation structures and advising on restrictions and planning opportunities in order to comply with the CFC law or minimize the tax and reporting exposure for individuals connected to the structures
  • reviewing corporate structures (holding, financing and trading) and proposing changes to the structures to ensure compliance with the law
  • comparing alternative jurisdictions of tax residence from the tax and immigration standpoint, considering relocation to the UK and a number of other jurisdictions, as well as providing pre-immigration tax planning advice
  • developing guidelines for corporate groups to ensure that they are managed and controlled in a tax efficient manner
  • liquidating existing companies and non-corporate structures
  • on the merits and issues of the amnesty and currency and control legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions