New law in force to return Russian capital from foreign tax shelters

Russian President Vladimir Putin signed a new tax law that will oblige Russian owners of companies registered in offshore tax havens to pay taxes in Russia. Source: Alexei Druzhinin / RIA Novosti

Russian President Vladimir Putin signed a new tax law that will oblige Russian owners of companies registered in offshore tax havens to pay taxes in Russia. Source: Alexei Druzhinin / RIA Novosti

Looking to clamp down on black money, Vladimir Putin signed a law that introduces amendments to the country’s tax code and obliges Russian owners of companies registered in offshore tax havens to pay taxes in Russia

Russian President Vladimir Putin signed on Tuesday a new tax law intended to return Russian capital and assets from foreign tax shelters.

The law introduces amendments to the country’s tax code that will oblige Russian owners of companies registered in offshore tax havens to pay taxes in Russia.

The law stipulates a mechanism for taxation of undistributed profits of controlled foreign entities.

The document obliges Russian tax residents to declare undistributed profits of controlled foreign companies. Minimum profits subject to declaration will equal 50 million roubles (about $1 million) in 2015, 30 million roubles ($660,000) in 2016 and 10 million roubles ($220,000) after 2017.

Under the document, a Russian company or individual with ownership of more than 50% of a foreign organization in 2015 and with 25% such ownership from 2016 are categorized as “controlling entities.” The individual threshold will fall to 10%, if Russian residents’ total shareholding is more than 50% of a controlled foreign company.

The law also stipulates penalties for failure by controlling persons to declare and pay taxes into the Russian budget. The penalty for such violations will amount to 20% of the unpaid tax but no less than 100,000 roubles ($2,220).

Failure by controlling persons to submit information or failure to submit authentic information will entail a penalty of 100,000 roubles for each controlled company, on which data are not provided.

At the same time, the existing Russian legislation stipulates criminal responsibility for tax evasion.

Deputy Chairman of the Federation Council Committee for Economic Policy Sergei Shatirov has said “Russia holds a leading place in the world among developed states by the scope of the use of offshore schemes.”

“A large part of the Russian economy is linked to offshore tax shelters in one way or another. The use of offshore havens by Russian business causes large damage to the country’s interests,” the senator said, adding that anonymous ownership and control of offshore structures were used for criminal activity, including for tax evasion and corruption.

The implementation of the new tax law will yield an additional $3-4.3 billion in tax revenues for the Russian budget annually, the senator said.

Meanwhile, capital outflow through offshore schemes is estimated at $200 billion this year alone, he said.

Overall, about $2 trillion has fled Russia in recent years through offshore schemes, according to expert estimates.

“De-offshorization is an important issue in ensuring national security,” the senator said.

Meanwhile, Deputy Finance Minister Sergey Shatalov said taxation of controlled foreign entities will yield up to $425 million a year.

First published by TASS

All rights reserved by Rossiyskaya Gazeta.

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