Jul 31, 2020
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Russians were allowed to withdraw money to offshores until 2025

The Ministry of Finance of the Russian Federation agreed to establish a three-year transition period, allowing Russian companies to pay dividends abroad at a zero tax rate from 2021 to 2024.

Russian President Vladimir Putin announced his intention to toughen the conditions for paying dividends from next year at the end of March. Since then, on his behalf, Moscow has been revising tax rates with jurisdictions popular with Russians, for example, Malta, Cyprus and Luxembourg. They can break the agreement with those who disagree in order to avoid double taxation. Most likely, the first such case will be Malta, transfers RBC.

The publication clarifies that the revised version of the draft law retains the benefit for Russian and foreign companies that have changed their tax residency to Russian for three years. However, the company should not be registered in the black list of offshore countries, and the tax authorities of the Russian Federation should learn about the accounts to which the dividends were credited within 180 days.

We are talking about the extension of the so-called end-to-end approach, which is applied when the actual recipients of funds are tax residents of the Russian Federation. Also, the condition of the benefit on dividends was made that at least half of the portfolio from which they are paid belonged to a Russian company during the year.

Most often, such a scheme was used by joint ventures, when foreign investors cooperated with partners from Russia. As KPMG partner Anna Voronkova notes, these were mostly transparent structures that did not use tax evasion schemes. Changing the scheme, albeit delayed, will put them in unequal conditions with Russian holdings or force them to abandon the use of a foreign legal field, which is critical for some investors.

The Finance Ministry explained that the decision to postpone was made after consultations with entrepreneurs in order to prevent a sharp increase in the tax burden.

As wrote, Russian President Vladimir Putin instructed the government to determine the list of offshore companies for which a 15% tax will be provided on dividends and interest from assets withdrawn from the Russian Federation. The list of instructions following the television appeal of the head of state in connection with the spread of coronavirus infection in the country was published on the Kremlin website.

The document also noted that the additional revenues received by the budget from this measure are supposed to be directed to payments to families with children, the unemployed and temporarily disabled. For the same purposes, the proceeds from personal income tax in the amount of 13% of investments in securities and interest on bank deposits exceeding one million rubles were used.

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