Russian Deoffshorization? The New CFC Rules

Russia has recently introduced significant changes to its tax code¹ – dubbed the "deoffshorization law"– intended to restrict the use of offshore corporate and trust structures controlled by Russian taxpayers, by taxing profits made through such structures, that have not otherwise been distributed back into Russia.

This note provides a high-level overview of some of the key changes, and is relevant to anyone connected with the structuring, establishment or maintenance of corporate or private wealth arrangements for Russian clients.

SPEED READ: WHAT'S HAPPENED?

From 1 January 2015, undistributed profits deemed made by a foreign company, trust, or other structure controlled by a Russian tax resident will be liable to profit tax in Russia, under new controlled foreign company rules (the CFC Rules). In addition, in certain circumstances foreign entities may themselves be deemed Russian tax resident. The CFC Rules are expected to result in the increased use of