• About Us
  • Our Services
  • Subscribe
  • Advertise
  • FAQ
  • Contact Us
Login | My Posts
Accountants in Cyprus
  • Publications
  • About Cyprus
    • Cyprus History
    • Cyprus Company Registration
    • Cyprus Tax
    • Cyprus VAT
    • Cyprus Accountants
    • Cyprus Economy
  • Find Accountants
  • Contact Us
No Result
View All Result
  • Publications
  • About Cyprus
    • Cyprus History
    • Cyprus Company Registration
    • Cyprus Tax
    • Cyprus VAT
    • Cyprus Accountants
    • Cyprus Economy
  • Find Accountants
  • Contact Us
No Result
View All Result
Accountants in Cyprus
No Result
View All Result
Home Publications Articles

Russian deoffshorisation law- bring the boys back home

December 10, 2014
in Articles
Reading Time: 6 mins read
Russian deoffshorisation law- bring the boys back home

On 18 November 2014 the State Duma (the lower chamber of Russian Parliament) approved a set of amendments to the Russian Tax Code for the purpose of implementing what has commonly been known as Russia’s “deoffshorisation law”.

The law will take effect from 1 January 2015, notwithstanding the fact that it is still a work in progress and in fact further amendments will likely be required during the course of 2015 in order to clarify the meaning and scope of various provisions.




What is “Deoffshorisation”?

“Deoffshorisation” denotes the Russian Government’s campaign to bring Russian business back to Russia. Historically, the vast majority of Russian assets have been held through, and bought and sold using, various off-shore jurisdictions outside the ambit of the Russian legal and tax systems. While the Russian Government’s deoffshorisation initiative is not confined solely to tax, it is certainly core to this initiative as, among other things, it purports to enable the Russian Government to tax offshore assets of Russian residents.

 

What will be the impact of Deoffshorisation Law?

 The Deoffshorisation Law introduces four principal changes to the Russian tax landscape from 1 January 2015:

  • A concept of “beneficial ownership” will be introduced for the purpose of curtailing the abusive use of conduit structures and back-to-back arrangements aimed at circumventing Russian withholding tax by channeling income from Russia through an intermediary structure located in a jurisdiction that has a double tax treaty with Russia. The Deoffshorisation Law will make it much more difficult for SPVs holding Russian financial assets or shares in Russian companies to claim benefits under the relevant double tax treaties; meaning that payments from Russian residents to such SPVs that are currently exempt from Russian withholding tax or that are taxed at favourable treaty rates, may cease to be eligible for treaty benefits.
  •  A concept of “controlled foreign company” (“CFC”) will be introduced pursuant to which a Russian resident (individual or corporate) who holds, directly or indirectly, a significant stake in a foreign company or “arrangement that does not have legal personality” (which is a concept intended to capture various types of unincorporated trusts and funds) will be obliged to pay taxes in Russia on any undistributed profits of such foreign company or “arrangement”. For this purpose, a ‘significant stake’ means (i) in the case of individual holdings, more than 50% until 31 December 2015 and, thereafter, more than 25%, and (ii) in circumstances where unrelated Russian residents hold collectively more than 50% of a foreign company, more than 10%. The concept of CFC is quite broad, and the number of carve-outs is rather limited (e.g. a company will not be regarded a CFC if it is a foreign bank, or a company in a high-tax jurisdiction that exchanges tax-related information with Russia, or a company implementing a qualifying oil and gas project in Russia). In addition, Russian residents will be obliged to notify Russian tax authorities of any shareholdings in foreign companies in excess of 10% of the foreign company’s share capital.
  • The concept of “tax residency” will be extended to foreign organisations such that, if it is determined that a foreign legal entity is effectively managed and controlled from Russia, it will become subject to Russian corporate income tax as if it were a Russian legal entity.
  • The concept of “real-estate rich” companies will be extended to cover foreign entities. While currently Russian withholding tax may apply to capital gains realised upon the sale of Russian companies that have significant assets in real-estate, with effect from 1 January 2015 Russian capital gains tax will also apply to the disposal of shares in foreign companies if more than half of the value of such shares is attributed to real-estate in Russia. It is also worth noting, that starting from 2007, Russia has been working with other jurisdictions to amend its double tax treaties and acquire the right to tax such disposals and prevent circumvention of Russian taxation simply by using two-tier offshore structures. For example, relevant amendments to the Russian – Cyprus double tax treaty will come into effect in 2017.

 

Conclusion

The Deoffshorisation Law will inevitably have a significant impact both on holding structures and the structuring of transactions across a wide range of sectors. If you wish to discuss the impact of this development on your business, please feel free to contact GLOBAL CONSULTANTS GROUP.

On 18 November 2014 the State Duma (the lower chamber of Russian Parliament) approved a set of amendments to the Russian Tax Code for the purpose of implementing what has commonly been known as Russia’s “deoffshorisation law”.

The law will take effect from 1 January 2015, notwithstanding the fact that it is still a work in progress and in fact further amendments will likely be required during the course of 2015 in order to clarify the meaning and scope of various provisions.




What is “Deoffshorisation”?

“Deoffshorisation” denotes the Russian Government’s campaign to bring Russian business back to Russia. Historically, the vast majority of Russian assets have been held through, and bought and sold using, various off-shore jurisdictions outside the ambit of the Russian legal and tax systems. While the Russian Government’s deoffshorisation initiative is not confined solely to tax, it is certainly core to this initiative as, among other things, it purports to enable the Russian Government to tax offshore assets of Russian residents.

 

What will be the impact of Deoffshorisation Law?

 The Deoffshorisation Law introduces four principal changes to the Russian tax landscape from 1 January 2015:

  • A concept of “beneficial ownership” will be introduced for the purpose of curtailing the abusive use of conduit structures and back-to-back arrangements aimed at circumventing Russian withholding tax by channeling income from Russia through an intermediary structure located in a jurisdiction that has a double tax treaty with Russia. The Deoffshorisation Law will make it much more difficult for SPVs holding Russian financial assets or shares in Russian companies to claim benefits under the relevant double tax treaties; meaning that payments from Russian residents to such SPVs that are currently exempt from Russian withholding tax or that are taxed at favourable treaty rates, may cease to be eligible for treaty benefits.
  •  A concept of “controlled foreign company” (“CFC”) will be introduced pursuant to which a Russian resident (individual or corporate) who holds, directly or indirectly, a significant stake in a foreign company or “arrangement that does not have legal personality” (which is a concept intended to capture various types of unincorporated trusts and funds) will be obliged to pay taxes in Russia on any undistributed profits of such foreign company or “arrangement”. For this purpose, a ‘significant stake’ means (i) in the case of individual holdings, more than 50% until 31 December 2015 and, thereafter, more than 25%, and (ii) in circumstances where unrelated Russian residents hold collectively more than 50% of a foreign company, more than 10%. The concept of CFC is quite broad, and the number of carve-outs is rather limited (e.g. a company will not be regarded a CFC if it is a foreign bank, or a company in a high-tax jurisdiction that exchanges tax-related information with Russia, or a company implementing a qualifying oil and gas project in Russia). In addition, Russian residents will be obliged to notify Russian tax authorities of any shareholdings in foreign companies in excess of 10% of the foreign company’s share capital.
  • The concept of “tax residency” will be extended to foreign organisations such that, if it is determined that a foreign legal entity is effectively managed and controlled from Russia, it will become subject to Russian corporate income tax as if it were a Russian legal entity.
  • The concept of “real-estate rich” companies will be extended to cover foreign entities. While currently Russian withholding tax may apply to capital gains realised upon the sale of Russian companies that have significant assets in real-estate, with effect from 1 January 2015 Russian capital gains tax will also apply to the disposal of shares in foreign companies if more than half of the value of such shares is attributed to real-estate in Russia. It is also worth noting, that starting from 2007, Russia has been working with other jurisdictions to amend its double tax treaties and acquire the right to tax such disposals and prevent circumvention of Russian taxation simply by using two-tier offshore structures. For example, relevant amendments to the Russian – Cyprus double tax treaty will come into effect in 2017.

 

Conclusion

The Deoffshorisation Law will inevitably have a significant impact both on holding structures and the structuring of transactions across a wide range of sectors. If you wish to discuss the impact of this development on your business, please feel free to contact GLOBAL CONSULTANTS GROUP.

ShareTweetShare
Previous Post

EUROCHAMBRES Economic Survey businesses cautiously optimistic for 2015

Next Post

Listing companies awaiting privatisation may revitalise investor interest in CSE

Next Post

Listing companies awaiting privatisation may revitalise investor interest in CSE

Newsletter

Latest News

Financial Services Sector: Future of Finance
Articles

Financial Services Sector: Embracing the Future of Finance

March 24, 2023

This article delves into the DLT Pilot Regime, its objectives, and its significance in the European financial services sector. The...

Read more
Financial Services

More financial services included in accountants portfolio

March 23, 2023
InvestPro ONline- Cyprus Preview

InvestPro Online Cyprus Preview

March 23, 2023

Accountants in Cyprus is an accounting portal that consists of information in the field of finance and a network of Cyprus accounting firms and other financial service providers .

USEFUL LINKS

  • Accountants in Nicosia
  • Accountants in Limassol
  • Accountants in Larnaca
  • Accountants in Famagusta
  • Accountants in Paphos
Menu
  • Accountants in Nicosia
  • Accountants in Limassol
  • Accountants in Larnaca
  • Accountants in Famagusta
  • Accountants in Paphos

USEFUL LINKS

  • Cyprus Tax Consultants
  • Tax Planning Cyprus
  • Tax Benefits Cyprus
  • Double Taxation Treaties
  • Cyprus Accounting Firms
Menu
  • Cyprus Tax Consultants
  • Tax Planning Cyprus
  • Tax Benefits Cyprus
  • Double Taxation Treaties
  • Cyprus Accounting Firms

AFFILIATED SITES

logo-lawyers-in-cyprus
lawyers-malta
2022 © Accountants in Cyprus. All Rights Reserved. Developed by Wizzweb
  • About
  • Cyprus Accounting Services
  • Auditors in Cyprus
  • Contact Us
No Result
View All Result
  • Publications
  • About Cyprus
    • Cyprus History
    • Cyprus Company Registration
    • Cyprus Tax
    • Accountants Cyprus
    • Cyprus Economy
  • Find Accountants
  • Contact Us
  • Our Services
  • Subscribe
  • Advertise
  • FAQ

© 2023 Accountant in Cyprus

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.