Jan 31, 2021
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There will be no more offshore companies

At the end of March last year, Russian President Vladimir Putin instructed the Ministry of Finance to revise agreements on the avoidance of double taxation (DTT) with a number of states where Russian business has offshore companies. Among the most popular destinations, Putin listed Cyprus, Malta, Luxembourg, the Netherlands, etc.

However, in reality, everything turned out to be much larger. No matter how I scolded Anton Siluanov on my channel, he fulfilled this instruction of the President quickly and efficiently. Real deoffshorization in Russia has started. I try to be objective. When Siluanov or Nabiullina perform truly useful actions for the Russian economy, I will praise them. I will not lose it.

But first things first

To begin with, I would like to present our new video, which was released on the Dvinsky Club channel. The work of state capitalism in practice:

But back to offshore. First, consider the situation with the most popular areas for capital withdrawal.

Cyprus. Initially, this country resisted. But after Siluanov threatened, banging his fist on the table (once a year and a stick shoots) that Russia would completely terminate the DTT, Cyprus agreed to raise the tax rate on dividends to 15%.

Malta and Luxembourg. With these states, everything went smoothly. Apparently, they took into account the experience of Cyprus and quickly agreed to increase the tax on dividends.

Netherlands. And here the negotiations have reached an impasse. Amsterdam refuses to comply with Russian demands. Well, that’s okay. Apparently, Moscow will terminate the DTT, and even theoretically there will be no outflow of domestic capital to Holland.

Today it became known that as many as 34 countries have revised their tax legislation after the demand of Russia. If earlier it was only about the four of the aforementioned countries, now it is clear that the work was carried out on a broad front. This is indeed a breakthrough. Now Russian business has practically no loopholes left to withdraw money from the country without loss.

We will see the first results of Putin’s deoffshorization already this year. If you look at the figures for 2020, then, according to the Central Bank, the net capital outflow from Russia amounted to 47.8 billion dollars. True, this figure should not be taken as the ultimate truth.

The item “capital outflow” also includes operations to repay external debt. At the end of 2020, Russia’s external debt fell by $ 21.3 billion to $ 470.1 billion.

Thus, not 47.8 billion, but “only” 26.5 billion were sent to offshores. Of course, this is also a significant figure, amounting to about 2 trillion in ruble terms. rubles, but the language does not turn to call it catastrophic.

Let us recall here that the Ministry of Finance is preparing to change the tax legislation for the SAR (Russian offshores). Now the tax rate on dividends in them will be 10% instead of 15%, which companies will be forced to pay in case of capital withdrawal abroad. I really hope that this measure will mark the beginning of the mass re-registration of domestic business into Russian jurisdiction. And this, if we consider the accumulated result, tens of trillions of rubles in the horizon of 7-10 years.

As a result, everyone will benefit: the Russian economy as a whole, the federal budget, and business. In general, state capitalism works as it should.

Konstantin Dvinsky

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