11.12.2020. Russia introduces fixed tax on foreign profits

Company News

Russia has set a fixed amount of  RUB 5 million (72,777US$) per year as tax on revenues from activities of controlled foreign companies (CFC).
The new rules allow CFC owners to elect to pay tax on a deemed fixed income of RUB 38.46 million, instead of being taxed on the CFCs’ actual declared profits.
The effect is a RUB 5 million flat-rate tax charge for the year 2020, regardless of the number of CFCs owned or their real financial performance.
Business owners will be able to elect for the lump sum tax by notifying the tax authorities before 31 December of the relevant calendar year. However, an extra month’s grace is being granted for the 2020 year, so that the filing deadline for that year is 1 February 2021.
Switching to the new regime will also exempt CFC owners from filing the foreign business’s financial statements and calculating its adjusted profits. The Russian tax authorities will not be able to request the CFC’s financial statements for the period when the new regime is applied, although individuals will have to file their own CFC notifications by 30 April, together with their tax returns.
The Law firm Baker McKenzie warns that investors “should also be aware that this new regime could be only temporary, as it may contradict the current OECD initiatives on a “new global minimum tax regime” and top-up taxation in source countries.”