Russian Federation: Russia's Deoffshorisation: First Foreign Ownership Filing Deadline Approaching Swiftly

Last Updated: 19 May 2015
Article by Alex Medlock

Ahead of their joint event on Deoffshorisation Compliance on 21 May, TMF Group's Sub Regional Director for CIS and the Nordics Alex Medlock and Artem Toropov, Senior International Tax Associate at law firm Goltsblat BLP LLP (the Russian practice of Berwin Leighton Paisner), outline the key deoffshorisation/CFC compliance requirements and explain how Russian residents and companies will be affected.

Individuals and companies classified as Russian tax residents are facing the tight reporting deadline of 15 June 2015 to comply with the first enforcement of the country's new Deoffshorisation Law - amendments to the Russian Tax Code that came into effect on 1 January 2015.

The initial implementation of the amended Russian Tax Code requires affected individuals and companies to submit a foreign ownership notification form disclosing

  • All non-Russian companies in which Russian tax resident individuals and companies hold (directly or indirectly) more than 10%
  • Unincorporated structures, including trusts, in relation to which a Russian resident acts either as (a) a settlor, (b) beneficiary or (c) a "controlling person."

If participation in a company is terminated or if a structure, such as a trust, is liquidated between 1 January 2015 and 14 June 2015 inclusively, no notification should be filed.


  • A RUB 50,000 fine applies to each company or structure that has not been reported by a taxpayer using a foreign ownership notification form, or for which a taxpayer has submitted false information
  • A RUB 100,000 fine applies for each undisclosed company or structure that is regarded as a Controlled Foreign Company (CFC) and for which a taxpayer fails to provide an annual CFC notification (first notification due in 2017)
  • A RUB 100,000 fine per item applies to a taxpayer who fails to submit required financial statements and other documents about a CFC to tax authorities, or who provides false information
  • A 20% penalty applies (though no less than RUB 100,000) for failure to pay tax on a CFCs' profit (this fine does not apply in relation to periods of 2015-2017).

What is considered a Controlled Foreign Company (CFC)?

A non-Russian company is regarded as a CFC if a Russian tax resident owns directly or indirectly more than 25% of such company (together with spouse and minor children). If a company is jointly owned by Russian tax residents by more than 50%, then it is regarded as a CFC of each Russian shareholder owning directly or indirectly more than 10% of such company. In 2015, a provisional threshold of more than 50% applies instead of the 25% and 10% thresholds that apply starting from 2016. Even if these threshholds are not met, a company can be regarded as a CFC if it is de facto controlled by a Russian tax resident.

Unincorporated structures including trusts are regarded as CFCs if they are controlled by Russian tax residents who exercise or have the ability to exercise decisive influence on decisions taken by a person that manages assets of a structure (trustee) in relation to distribution of income or profit among beneficiaries.

The tax base of CFCs is determined based on foreign financial statements (with certain adjustments), but only if a CFC is located in a treaty jurisdiction and is subject to mandatory audit (this requirement may be changed to voluntary audit by upcoming legislative amendments).  

Otherwise Russian taxpayers must perform a full recalculation of tax base using Russian corporate profit tax accounting rules (Russian GAAP) and financial statements or bank account statements and primary documents of a CFC. The relevant accounting documents have to be translated to Russian and provided to Russian tax authorities together with Russian tax returns.

Corporate tax residency rules  

Foreign companies, including but not limited to those regarded as CFCs, can be deemed as Russian tax resident companies that are subject to 20% Russian corporate income tax if their "place of effective management and control" is in Russia.  If a non-Russian company is regarded as a Russian tax resident vehicle, it is not regarded as a CFC. 

A beneficial regime is established for companies that are resident in tax treaty jurisdictions with proper local substance (including having its own sufficiently skilled employees). Substance should be properly documented, and these documents need to be provided to Russian tax authorities.

Taxpayers are advised to consider the impact of corporate tax residency rules  on companies that are disclosed by them in foreign ownership notifications.

CFC exemptions

CFCs located in tax treaty jurisdictions with a high effective tax rate (ETR) or with large share of "active business" income (as opposed to income from "passive" activities) are exempt from CFC tax, but not from CFC filings. Moreover, to apply the exemptions taxpayers need to provide information on ETR and "active business" income to Russian tax authorities.

Corporate taxpayers have time until 1 January 2017 to liquidate CFCs and receive their assets via liquidation or sale tax-free at the level of Russian tax resident company. No exemption is provided for individuals who wish to liquidate their CFCs, as their "onshorisation" is regulated by the special "capital amnesty" (voluntary disclosure program) law.


An amnesty in the form of a voluntary disclosure program offers individuals the opportunity to disclose until the end of 2015 their foreign CFCs, bank accounts, real estate and other holdings with no extra charge in return for guarantees of no criminal, administrative or tax liability for tax, customs and foreign exchange crimes in connection with the disclosed assets. 

The guarantees only apply only to pre-2014 actions and do not cover restructurings made in 2014 and 2015. A possible amendment is likely to extend the guarantees to pre-2015 actions.

There is also the ability to transfer overseas assets from nominees to personal ownership without extra tax charges. 

Compliance is crucial

Goltsblat BLP LLP's Artem Toropov said: "While this first aspect of the new deoffshorisation rules is now being enforced, other mandatory forms and procedures are yet to be finalised, for example a form for foreign special purpose vehicles (SPVs) to claim themselves as Russian tax resident companies, and a form on "fiscal transparency" for withholding tax and "beneficial ownership" purposes and so on, which slows down the restructurings of groups who want to bring their corporate structures "onshore" to Russia for tax purposes.  A number of important amendments to the Deoffshorisation Law are also underway.

"It is strongly recommended that Russian corporate and individual taxpayers seek legal and tax advice on how their international structures are affected by the new regulations and how to mitigate Russian tax risks through restructurings, change of corporate governance procedures and other measures. Any existing or new structures should basically have a defence file and should be ready to withstand the highest degree of scrutiny by tax authorities in tax litigation."

Alex Medlock, sub-regional director CIS at TMF Group, said: "It's becoming more difficult for CFC companies to keep business compliant with Russian regulations. Firstly, it can be a challenge just trying to keep track of the many direct and indirect foreign holdings; now many companies are realising they may need additional support in the form of an Entity Management System. This new requirement to file the foreign ownership notification form is not a one-off; a new form must be filed for every change in participation.

"Secondly, companies have to provide continuous reporting, which may require a lot of information from the overseas jurisdictions, plus the ability to collect it and translate it into Russian GAAP. This requires either additional staff or outsourcing to a service provider. The outsourcing company has to meet several criteria: have experience in Russian GAAP and tax; knowledge and experience in international structuring and financial reporting; and excellent knowledge of English to communicate with the overseas company and provider. 

"Working with different outsourcing companies will put extra pressure to submit on time and Russian companies can end up paying extra for the coordination of these services. Ideally, it should be one outsourcing company that has experience on the Russian market, and offices in the overseas jurisdictions, to provide accurate and timely reports." 

For more information about compliance with the strict new Russian law, join the webinar co-hosted between TMF Group and Goltsblat BLP LLP. 

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
Withers LLP
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
Withers LLP
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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