From 1 March 2022, Russian business owners will be able to transfer business and personal assets worth at least RUB 100 million to new private foundations established under Russian law. As opposed to inheritance foundations, which have not caught on in Russia, private foundations can be established and tested during the lifetime of their founders.
Every year our lawyers produce Doing Business in Russia, a general guide for companies operating in or considering investment into the Russian Federation. The guide presents an overview of the key aspects of the Russian legal system and regulation of business activities in this country.
Welcome to our first quarter issue of the Private Wealth Newsletter. Our featured insight for this issue is a discussion of the passage of the Corporate Transparency Act by the United States to introduce federally-mandated beneficial ownership reporting obligations for US corporations and limited liability companies. We also include insights…
The Russian Federal Tax Service (the “FTS”) has issued a letter clarifying the provisions of Article 54.1 of the Russian Tax Code on tax avoidance, outlining a methodology for tax inspectorates on how to identify misrepresentations of business operations, check material facts and intent to use sham or “fly-by-night” companies. It also provides taxpayers with criteria for counterparty due diligence, which should eliminate the possibility of their subsequent tax liability.
In addition, the FTS has finally admitted the need for so-called “full tax reconstruction” (a comprehensive reclassification of transactions previously applied only by the courts) and the ability to deduct actual expenses for corporate profits tax purposes and to offset input VAT on transactions with sham companies. However, this is possible only if a taxpayer discloses the actual suppliers and financial terms in such transactions.
New amendments to the Russian Tax Code1 (“Law”) will allow individuals to reduce the Russian individual income tax on profit distributions from foreign companies and unincorporated vehicles (e.g., trusts) sourced from dividends originally paid by Russian companies that are subject to Russian withholding tax (“indirect tax credit”).
The Law eliminates the existing double taxation and economically equates ownership of Russian assets via Russian and foreign companies (trusts). At the same time, the Law eliminates the 0% tax rate previously available for Russian companies on dividends received through intermediary foreign companies that are not beneficial owners of income. This will allow, for example, the application of the 15% Russian withholding tax rate on dividends paid to Cypriot and Luxembourg intermediary companies under the recently amended tax treaties. Some historic holding structures will get a deferral; for them the new rules will apply as of 2024.
On 1 December 2020, the Luxembourg tax authorities issued Circular L.I.R. n° 147/2, 166/2 et Eval. n° 63 (“Circular”) regarding non-eligibility of Gibraltar companies for the provisions of Directive 2011/96/EU (parent-subsidiary directive).
On March 25th the Russian President announced the following steps in connection with the COVID-19 pandemic: March 30 to April 3 will be non-working days with salary retention; six months’ deferral on paying taxes (except for VAT) for small and medium enterprises (SMEs); the deferral also applies to social security…
From 1 January 2020 Russia is abolishing all currency control restrictions on payment of funds by non-residents to bank accounts of Russian residents opened with banks in OECD or FATF member states, provided that such states participate in the automatic exchange of financial account information with Russia. This will mark…