The Forthcoming Amnesty to Capital Returning to Russia Can Become a Pleasant ‘Bonus’

In his annual Presidential Address to the Federal Assembly, Vladimir Putin declared that the Russian authorities would take new steps towards 'de-offshorization' of the country's economy, including the launch of a full amnesty to capital returning to Russia.

'If a person legalizes his holdings and property in Russia, he will receive firm legal guarantees that he will not be summoned to various agencies, including law enforcement agencies, that they will not 'push the squeeze' on him, that he will not be asked about the sources of his capital and methods of its acquisition, that he will not be prosecuted or face administrative liability, and that he will not be questioned by the tax service or law enforcement agencies', promised the President.

This statement can be viewed as a long-awaited expression of the Kremlin's political will to launch an amnesty to capital returning to Russia. However, the Presidential Address does not specify terms of this amnesty. There still remain some intriguing questions to be answered. Will the amnesty imply full exemption from taxes? Or will it be required that the 'returnee' should pay an 'application fee', the amount of which is to depend on the amount of capital (or assets) being declared? Or will the amnesty imply exemption from penalties for the tax offenses committed during the previous tax periods, while the tax amounts per se should be paid in full? Thus, it remains as yet for the RF Government to make specific decisions as to the essence and the extent of the forthcoming amnesty, and to thoroughly elaborate on these issues.

Bearing in mind the coming into force, from 1 January 2015 onwards, of the rules for taxing foreign controlled companies, it can be said that in some cases it would be advantageous for companies to repatriate at least some of their assets to Russia. As far as such cases are concerned, an amnesty to capital returning to Russia may indeed influence the business decision-making process, or simply become a pleasant 'bonus'. However, it is still far from certain that even a full amnesty will be able to entice businessmen to transfer their capital to Russia unless they should also have some other important reasons for doing so.

Svetlana Shatalova – Head of the Tax Policy Department of the Institute of Applied Economic Research, RANEPA