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Deoffshorization Transition Period to Be Halved

14.11.2014 06:40 / RBC

According to the draft bill passed in the first reading, a ‘controlling shareholder’ in a foreign company in 2015–2016 will own over 50%, and from 2017 – 25%. Deputies, however, propose 25% to be the controlling share from 2016 onwards, with necessary amendments for the second reading already in place.

“This is a choice: where do you want to work? One year is quite enough to decide”, says a deputy. He adds that liability for tax non-payment will only be enforced in 2017 года. This is required to protect the business, he says.

The bill is a hard compromise, its anti-offshore reforms are halfway measures that could have been stricter – this is a hot topic in our society; the amendments are probably a ‘tougher’ reaction, the deputy said.

Amendments also introduce formulas for each businessman to be able to determine whether the law applies to them or not: the effective tax rate formula for foreign company income and the average weighted rate for corporate profit tax.

All amendments will be reviewed by the budget and tax committee Friday, with the second reading due next week – on 18 November, Committee Chairman Andrey Makarov told RBC. He said there are proposals from United Russia and the Communist Party, the Government, the Federation Council etc. “All of these amendments will be reviewed except the ones from major companies and business associations, which are not allowed legislative initiative. However, we will keep their opinion in mind”, he remarked.

“The new rules will definitely result in a mere one year left for the business to pick up sticks and return to Russia or say goodbye Russia as tax residency and become fully foreign”, sums up Partner at Paragon Advice Group Alexander Zakharov.

Mikhail Rubin, Alisa Shtikina, Yana Milyukova, Svetlana Bocharova

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