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.

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”

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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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