Draft deoffshorisation laws set to be implemented in Russia

By in

By the end of the year Russia is expected to make changes to its Internal Revenue Code on the control of foreign companies, being the last of the largest world economies to create an institute of controlled foreign companies in national taxation law.
By the end of the year Russia is expected to make changes to its Internal Revenue Code on the control of foreign companies, being the last of the largest world economies to create an institute of controlled foreign companies in national taxation law. Popularity in Russia increased for so called ‘deoffshorisation’ during mid-2000s, when legislation on Controlled Foreign Companies (CFC rules) was adopted by the majority of member countries at the OECD. The answer to the economic crisis of 2008-2009 was to strengthen the regime of controlled foreign companies. CFC rules experienced significant changes in 2010-2012 with virtually all member countries of the OECD. Russia is not a member of the OECD, but has for many years sought to become a member state however authorities have been following the trends set by them in the area of tax law.

Russia shows a trend in creating a similar tax regime to that of other world economies by which Russian tax policies will develop over the next few years. To predict Russia’s tax future one can look at what the OECD is now deciding in taxation.

There are expectations that the OECD Base Erosion and Profit Shifting (BEPS) will encourage full tax transparency. The international exchange of tax information has already started, which will increase until a common information base has been created. Income from jurisdictions that do not participate in it will eventually not take part in a significant role in the world trade. Hiding income from taxation will be virtually impossible.

For Russian businesses the meaning of coming changes means the time for working offshore has lessened and will not be returning and all businesses will have to bring a restructuring of mentalities and business models, or some not survive the new global taxation laws.