Russian Holdings Plan to Give Up Offshore Services

On December 19, it became known that a number of large Russian companies – KamAZ, RusHydro and Rusal – declared that they supported deoffsorization of Russian economy and intended to abandon their offshore structures.


In terms of companies, restructuring of holding structures may become a complicated process as regards legal execution of assets transfer, restructuring of borrowings, tax consequences (both at the time of transfer of assets and during subsequent activities), legal protection of shareholders and other.


Deoffshorization of the economy is becoming an ever more popular topic. So, on December 12, Vladimir Putin in his Message to the Federal Assembly of the Russian Federation proposed to give up state support (in the form of loans of the Bank for Foreign Economic Affairs and state guarantees) of companies registered in offshore zones and ban their access to fulfillment of state contracts and contracts of entities with state participation.


On December 18, the Government of the Russian Federation and State Duma deputies from the United Russia Party finalized proposals on corporatization of the NPF; according to the above proposals, companies registered in offshore zones (and, probably, any foreign companies) are not allowed to be shareholders of the NPF.


A complex of tax measures considered by the Government will contribute to the fight against withdrawal of profits through offshore companies from taxation in Russia. Such measures include introduction in the tax legislation of the definition of beneficiary ownership and tax residency of legal entities and rules of controlled foreign companies, upgrading of rules of control over transfer pricing and rules of insufficient capitalization, establishment of an efficient system of international exchange of information between tax authorities of different countries.

S.S. Shatalova, Senior Researcher of the RANEPA