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Important changes in Russian Tax Legislation - CFC and Voluntary Disclosure
12/01/2016

Two recent changes in Russian tax legislation are the introduction of Controlled Foreign Companies, ‘CFC’, and Federal law N° 140 relating to the voluntary disclosure of assets and bank accounts by physical persons, both of which will especially have an impact on Russian tax residents who own foreign companies and assets.

These two new laws are linked, even though the respective scope is not the same, as the CFC legislation concerns only Russian tax residents and  Federal law n°140 concerns all individuals whether foreign nationals. The affected persons who own foreign registered companies, structures,  real estate and bank accounts have new obligations to the Russian tax authorities.

The first step of the legislation is the voluntary declaration of the ownership of foreign companies, structures, foreign banks accounts, real estate and assets to the Russian tax authorities which was to be done by 15th June 2015 and in default a Russian tax resident would be subject to fines as well as administrative, tax and possibly criminal penalties.

The Russian authorities then offered an amnesty for the reporting of  foreign assets, bank accounts  and companies to Russian tax residents providing full disclosure was made on or before on 31st December 2015. However, the deadline has been extended by six months, until 30th June 2016.

Individuals who voluntarily disclose all assets, companies, real estate and bank accounts held outside the Russian Federation before 30th June 2016, can benefit from the amnesty which extends to criminal and administrative sanctions and tax liabilities.

Even if you are believe there is no risk of claim, regarding CFC or foreign bank accounts, by making a voluntary declaration can guarantee compliance and discharge your liability to the Russian tax authorities.

We can guide you through the complexities of these new rules, whether they concern you, whether you can benefit from exemptions and what will be impact of the declarations on your tax situation in Russia. If necessary, we can also assist you by providing information and documents relating to your assets as requested by Russian tax authorities.

The second step: on receipt of the declaration, the Russian tax authorities will determine which structures are subject (or not) to taxation in Russia. In certain case it might be necessary to restructure existing schemes, including property holding company to be compliant with Russian relevant legislation, as well as to avoid double taxation. We are able to advise and implement any restructuring that might be necessary.

The new Russian legislation also impacts on groups of companies, bank accounts, existing foreign loans etc. and can induce a high level of risks. It is important to review all foreign structures and to examine possible options of restructuring in the light of the aforementioned legislation. The CFC rules will extend to the ownership of French or Monegasque properties, which need be optimised both regarding Russian as well as Monegasque and French current legislation.

We would like also to draw you attention of the need to review your real estate property structure in order to determine the most optimal solution in full compliance with the CFC rules.

Please contact us should you have any enquiries on compliance with new Russian tax legislation. Our Russian speaking team of lawyers, tax consultants and accountants would be pleased to assist and are at your disposal to advise on existing or future structures, both for private asset ownership and professional holding or trading companies.

Please feel free to contact us for the review of your existing structure.

 

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Rosemont Consulting SARL provides a full family office service to individuals and their families, and can assist in structuring and administering their assets in a tax efficient fashion complying with international regulations. With partners in strategic locations the company is able to offer an integrated service covering important areas of interest to clients including:

• Tax, estate and business planning
• Real estate ownership and management
• Onshore and offshore corporate and private advisory services

For further information on Rosemont Consulting SARL and services provided please visit www.rosemont.mc
 
Please do not hesitate to contact Cecile Acolas at c.acolas@rosemont.mc for queries on this topic