Russia sets up offshores onshore

RUSSIA / FSU POLITICS - In Brief 22 Aug 2020 by Alex Teddy
The Finance Ministry published changes to the tax code on August 19. There will be a 5% tax for Russian offshore companies which are based in Vladivostok and Kaliningrad. These cities are Special Administrative Regions (SARs). These offshores onshore were set up in 2018. This allowed Russian companies based abroad to deal with sanctions. However, by 2019 only 10 companies had taken advantage of the scheme and most of them were owned by Deripaska. Yandex has also now used the scheme for its public interest foundation. Yandex is trying to meet the state halfway after a high new tax was imposed on tech firms that are part foreign owned. SARs confer similar advantages to conventional offshores. Companies can conceal information about beneficial ownership. They are exempt from paying a tax on the proceeds of asset sales and dividends. But Russia is about to raise the tax on dividend payments being remitted abroad from 5% to 15%. The government is keen to get Russian companies based on Cyprus to repatriate themselves. It is unclear when the new rules will take force: either 2021 or 2022.

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