Tax. Major Russian Legislation Changes For 2014

Controlled foreign company rules

Federal Law No. 376-FZ of November 24, 2014

This law, which entered into force on January 1, 2015, introduces a fundamentally new institution into Russian tax legislation: rules on controlled foreign corporations (CFCs) (primarily the new chapter 3.4 and new article 309.1 of the Russian Federation Tax Code (RF TC)).

Under the CFC rules, the undistributed profits of foreign companies and of foreign structures without the formation of a legal entity, if controlled by individuals or legal entities that are Russian tax residents (controlling persons), will be recognized for Russian tax purposes as income of the controlling persons, taxable depending on the status of the controlling person as corporate tax (at 20%) or personal income tax (at 13%).