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Putings Signs Anti-Offshore Act

25.11.2014 11:09 / TASS

President Putin has signed the so-called Anti-Offshore Act, under which taxpayers are to report their participation in foreign companies.

The Act introduces amendments to the controlled foreign entities profit section of the Tax Code. It has been posted on the official legislative website. The Act was passed by the Duma on 18 November and approved by the Federation Council on 19 November.

Controllers are under obligation to report to tax authorities their participation in controlled companies, declare and substantiate undistributed profits of these companies. Minimum profit to be declared will be RUB 50mn in 2015, down to RUB 30mn in 2016, and RUB 10mn after 2017.

The controlling party, according to the Act, is the 50%-plus owner of the company in 2015, 25% owner since 2016. Russian tax residents who along with their spouses and children own over half of the company, have a 10% individual ownership limit.

The Act introduces criteria for applicability of ‘control’ to foreign entities. For instance, a foreign company is not deemed ‘controlled’ if the effective income tax rate for the local financial year equals at least 75% of the company’s average weighted corporate profit tax rate.

Non-payment or incomplete payment of the tax resulting from omission of the controlled foreign company profit from the tax base is punishable by a fine of 20% off the unpaid tax amount or a minimum of RUB 100k.

Failure to present financial reports of the controlled foreign company to the tax authorities along with the tax declaration is punishable by a RUB 100k for each company.

Non-declaration of a controlled foreign company is punishable by a RUB 100k fine per each company. Failure to disclose control or submitting fake reports is punishable by a RUB 50k fine for each company. The existing criminal penalty for tax evasion also applies.

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