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Minfin Expects to End Debate on CFC Law by December

30.10.2015 12:00 / TASS

Minfin expects to finalize the debate on Controlled foreign corporation (CFC) law by December, said Deputy Finance Minister Sergey Shatalov at the AmCham Annual Tax Conference.

The first package of de-offshorization laws was passed in 2014, and the CFC Act followed in 2015. Immediately after, the first bunch of amendments was introduced to the State Duma, and now the parliament received a second one.

“We have reached an understanding with the State Duma that in the near future, by November-December, we will have resolved all the CFC disputes”, said Shatalov.

One of the debated points is the option to use IFRS instead of Tax Code Chapter 25 for the tax base. “We will liberalize these rules to the maximum in the nearest future. IFRS will be used for tax base calculation in almost all cases, if the company agrees to present financial reporting audit results, making the country of incorporation irrelevant”, he said. Other companies, conducting business in countries with double taxation or other tax treaty with Russia, will not have to present audit results to use IFRS reporting.

“Companies who will have to report under TC Chapter 25, will not be required to convert to Roubles all of their tax base transactions, we will summarize the financial year instead. The tax base can be nominated in foreign currency, and the year-end or tax period results will be converted into Roubles”, said Shatalov.

“Tax reporting will be minimized. For instance, current reporting includes both CFC participation and control. This is redundant. If a CFC is controlled indirectly through Russian public entities, there will be no need to report it”, explained Shatalov.

He stated that tax resident rules will be amended to enable foreign companies to claim Russian tax residency.

“These companies will enjoy added benefits, especially those who claim Russian tax residency. They will be entitled to foreign tax residency benefits, exempt from currency regulation and control rules for our currency residents. Owners and their companies will retain all tax preferences, including tax-free dividends”, said Shatalov.

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