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1 © Rödl & Partner 07.06.2016
Achieve Together
Alexander Yudovich | Moscow | 7 June 2016
Intax Expo Russia 2016
Deoffshorisation in Russia: first results and available solutions for clients
2 © Rödl & Partner 07.06.2016
Agenda
02 Exemptions by participation
01 Exemption by tax residence status (individuals)
03 CFC profits exempt or not considered for taxation purposes
04 Exemption by changing the tax residence status (legal entity)
3 © Rödl & Partner 07.06.2016
Agenda
02 Exemptions by participation
01 Exemption by tax residence status (individuals)
03 CFC profits exempt or not considered for taxation purposes
04 Exemption by changing the tax residence status (legal entity)
4 © Rödl & Partner 07.06.2016
Exemption by tax residence status (individuals)
Tax residence under
Tax Code RF vs. FNS RF
183 Days vs. „Tie breaker rules”
183 Days
MinFin RF N 03-08-РЗ/23009 from 21.04.2016
But: centre of vital interests: real vs. artificial
(Decree Plenum VAS № 53 from 12.10.2006)
5 © Rödl & Partner 07.06.2016
Agenda
02 Exemptions by participation
01 Exemption by tax residence status (individuals)
03 CFC profits exempt or not considered for taxation purposes
04 Exemption by changing the tax residence status (legal entity)
6 © Rödl & Partner 07.06.2016
Exemption by participation
Participation in CFC 1) 25% or 10% (jointly with wife / husband and minor children if jointly with another tax residents RF more than 50%) or
2) by another form of control
Corporate control vs. Right to distribute the profit
Right to distribute the profit (to any person)
7 © Rödl & Partner 07.06.2016
Agenda
02 Exemptions by participation
01 Exemption by tax residence status (individuals)
03 CFC profits exempt or not considered for taxation purposes
04 Exemption by changing the tax residence status (legal entity)
8 © Rödl & Partner 07.06.2016
CFC profits exempt or not considered for taxation purposes
In case the effective tax rate for the profit of a CFC for the financial year is not less than
75 percent of the weighted average corporate income tax rate in the RF, then the profit of this
company is exempt from taxation. In addition there should be a DTT with the state of the
permanent residence of the CFC and such state should not be included in the list of states not
exchanging information for taxation purposes.
First CFC-Notification per 31 December 2016 till 20 March 2017 (with exemption papers)
Profit
Foreign company
Effective tax rate ≥
¾ of the weighted average corporate
income tax rate
Exempt from taxation
9 © Rödl & Partner 07.06.2016
CFC profits exempt or not considered for taxation purposes
- effective tax rate for the income (profit) of
the foreign company;
Н – income tax amount, calculated by the foreign
company and its separate offices according to its
proper law and amount withheld from the income
of the company at source;
П – income (profit) amount of the foreign company
defined according to the provisions of the Tax
Code.
эфф
НСт 100%
П
Effective tax rate
эффСт
Weighted average corporate income tax rate
срвзвеш
Ст1 П1 Ст2 П2Ст 100%
П1 П2
П1 – profit amount of the foreign company defined
according to the provisions of the Tax Code minus
dividends received by the foreign company;
П2 – dividends amount received by the foreign
company;
Ст1 – profit tax rate of 20% (legal entity);
Ст2 – income tax rate of 13% (individuals).
10 © Rödl & Partner 07.06.2016
Case 1
Active foreign
company
(GmbH)
Real estate
company
(GmbH)
Holding
(GmbH)
1st son
2nd son
50 %
50 %
Effective tax rate =
28%
Effective tax rate = 1,5 %
Effective tax rate =
15,825 %
V taxed
X Not
taxed
X Not
taxed
100%
100%
Lease
(exemption via P. 1 Art. 25.13-1 Tax Code RF)
dividends
dividends
11 © Rödl & Partner 07.06.2016
Case 1 (modified)
Active foreign
company
(GmbH)
Real estate
company
(GmbH)
Holding (KG)
1st son
2nd son
50 %
50 %
Effective tax rate =
28%
Effective tax rate =
15,825 %
? taxed
X Not
taxed
X Not
taxed
100%
100%
Lease
(exemption via P. 1 Art. 25.13-1 Tax Code RF)
PIT first by receiving
the profit physically
(cash-flow principle)
imputed profit should be taxed on participants level
dividends
dividends
12 © Rödl & Partner 07.06.2016
Case 1 (final)
Active foreign
company
(GmbH)
Real estate
company
(GmbH)
Holding
(GmbH)
1st son
2nd son
50 %
50 %
Effective tax rate =
28%
Effective tax rate =
15,825 %
X Not
taxed
X Not
taxed
100%
100%
Lease
(exemption via P. 1 Art. 25.13-1 Tax Code RF)
X Not
taxed
13 © Rödl & Partner 07.06.2016
Agenda
02 Exemptions by participation
01 Exemption by tax residence status (individuals)
04 Exemption by changing the tax residence status (legal entity)
03 CFC profits exempt or not considered for taxation purposes
14 © Rödl & Partner 07.06.2016
Case 2 – IP-Transfer
OOO Ltd BVI
Exclusive rights on software
Ind. 1 Ind. 2 Ind. 3
1/3 1/3 1/3
Consideration
Software engineering and technical assistance
End
customer
Previous structure
15 © Rödl & Partner 07.06.2016
Case 2 – IP-Transfer (Non-tax-resident status in Cyprus)
OOO
Ltd. Cyprus (Non-tax-resident in Cyprus) =
Tax Resident in Russia
Exclusive rights on software
Ind. 1 Ind. 2 Ind. 3
1/3 1/3 1/3
Consideration
Software engineering and technical assistance
End
customer
Current
structure
PE rus. CFC (-)
Assets protection (+)
Art. 4 P. 1 DTT
“place of management“
16 © Rödl & Partner 07.06.2016
Case 2: IP-Transfer (Non-tax resident status in Cyprus)
Questions in Russia and in Cyprus:
1. May treatment of Ltd. Cyprus as a Russian tax resident be enforced before 1 January
2018?
2. Before Ltd. Cyprus becomes a Russian tax resident, what notices have the beneficiaries of
Ltd. Cyprus to submit in Russia regarding the controlled foreign company?
3. Before Ltd. Cyprus becomes a Russian tax resident, will the financial statements in
accordance with the Cypriot accounting standards be sufficient for accounting for the profits of
Ltd. Cyprus (as a controlled foreign company)?
4. What will be the tax rates applicable to Ltd. Cyprus in Russia after the permanent
establishment emerges / tax residency is accepted voluntarily?
5. Will Ltd. Cyprus be able to exist as neither Cypriot nor Russian tax resident for a while
(before establishment of the Russian office) ?
6. Art. 217 Clause 60) of the Tax Code RF: criteria for the entitlement to tax exemptions?
7. Options for the transfer of assets (Trademark, IP-Program, money) from Ltd (BVI) to Ltd.
Cyprus
8. Non-tax-resident certificate in Cyprus
9. Subject to tax in Cyprus and offsetting of the amount against tax payable in Russia
17 © Rödl & Partner 07.06.2016
We and the Castellers de Barcelona
The human towers are like us:
”every single individual counts” –
when working together and when
supporting our clients.
18 © Rödl & Partner 07.06.2016
„Each and every person counts“ – to the Castellers and to us.
Human towers symbolise in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage
and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are
today. „Força, Equilibri, Valor i Seny“ (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their
fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative
journey with the representatives of this long-standing tradition of human towers – Castellers de Barcelona – in May 2011. The association
from Barcelona stands, among many other things, for this intangible cultural heritage.
Your contact
Alexander Yudovich
Associate Partner
Head of Tax Practice
Rödl & Partner Rödl & Partner
Business Centre LeFort 7/A, line 14th
Elekrozavodskaya ul. 27, bld. 2 Vasilievsky Ostrov
107023 Moscow / Russia 199034 St.Petersburg / Russia
phone +7 (495) 933 51 20 phone +7 (812) 320 66 93
fax +7 (495) 933 51 21 fax +7 (812) 320 66 95