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Tax treatment for foreign investors selling Russian stocks has changed

July 2011 - Tax & Private Client. Legal Developments by Pepeliaev Group.

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Pepeliaev Group advises that on 07.06.2011 were forced some regulations of Federal law â„–132-FZ "On Amendments to article 95 of the first part and to the second part of Russian Tax Code regarding creating favorable tax conditions for innovation activity and article 5 Federal law "On Amendments to the second part of Russian Tax Code and some laws of Russian Federation".

Forced regulations changed in addition the article 309 Russian Tax Code, established some peculiarity of taxation income of foreign organizations deriving from sources in the Russian Federation without PE.

By the old rule of Russian Tax Code profits from Russian companies stocks (shares) selling should be recognized as incomes from sources in the Russian Federation, that was taxable in Russian. This rule regards to stocks (shares) of Russian Companies, which assets consists of immovable property situated on the territory of the RF more than 50%, and to derivatives, which are based on such stocks (shares). At a present time profits from Russian companies stocks (shares) selling, that are circulate on exchanges of the securities and which assets consists of immovable property situated on the territory of the RF more than 50%, and to derivatives, which are based on such stocks (shares) shall not be recognized as incomes from sources in the Russian Federation.

PG's comment
The described changes can make great interest for foreign investors in Russian Companies stocks which circulate on exchanges of the securities. Today if foreign investor without PE existing has an income from any Russian Companies stocks selling, such income should not be recognized as incomes from sources in the Russian Federation. So, such income will be untaxed in Russian Federation.

Andrey Tereschenko, Partner, Pepeliaev Group

T. +7 495 967 00 07  E. a.tereschenko@pgplaw.ru

Ivan Zelenin, Paralegal, Pepeliaev Group

T. +7 495 967 00 07  E. i.zelenin@pgplaw.ru