The Law defines control over a corporate entity as exercising influence (or having the ability to exercise influence) over distribution of profits of that entity through direct or indirect participation in the capital of that entity (e.g. as a shareholder); and having rights under a shareholders’ agreement regulating the management of that entity, or other criteria.

A controlling entity of a foreign organization is an individual or a legal entity:

– whose participation interest in an organization is more than 25% (before 1 January 2016 – more than 50%), or

– whose participation interest in an organization (for individuals along with their spouses and minor children) is more than 10%, if a direct and (or) indirect participation interest of all entities recognized as tax residents of Russia in this organization (for individuals along with their spouses and minor children) is more than 50%, or exercising control over such an organization in their own interests or interests of their spouse and minor children.

The income of a controlled foreign company:

– will be treated as an income of the relevant Russian controlling party (whether corporate or individual) of the CFC in proportion to the interest of that controlling party in the capital of the CFC;

– will be deemed to be received by the relevant Russian controlling party when it is distributed by the CFC or, if there is no such distribution in the relevant tax year, on 31 December of that tax year;

– will be calculated on the basis of financial reporting period of the CFC under the laws applicable to the CFC.

The income of a CFC would not be accounted for by a Russian controlling party if the income of the CFC does not exceed 30 million Rubles in the year ending 31 December 2016; or 10 million Rubles thereafter.

CFC’s profit reduced by an amount of paid dividends is included as a portion corresponding to participation interest in CFC into tax base of a controlling entity – resident of the Russian Federation:

– for controlling entity as an individual – on personal income tax;

– for controlling entity as a legal entity – on corporate income tax.

– In broad terms, the CFC rules would apply in relation to non-Russian tax resident corporations (and other entities) controlled by one or more Russian tax residents. The rules would:

– deny double tax treaty benefits to CFCs;

– instead treat the income of a CFC as taxable in the hands of a Russian controlling party when received by a CFC, regardless of whether an actual distribution to any Russian controlling party took place;

– require Russian tax residents to report their interests in foreign companies to Russian tax authorities.

The Law also introduces a new test of «place of effective management» in order to determine whether a foreign company is a tax resident in Russia.

A foreign company will not be treated as a Russian tax resident (unless it elects to be treated so) if:

– it is treated under the provisions of a double tax treaty to which Russia is a party as being a tax resident in another state;

– it is engaged in activities under production sharing agreements, concession agreements, licensing or service agreements or certain other prescribed agreements with a foreign government; or

– it has a separate branch in Russia.

As for individuals, they are recognized as tax residents of the Russian Federation in the same way as before on the basis of their actual stay in Russia for at least 183 calendar days within 12 consecutive months.

In order to facilitate the repatriation of hidden assets to Russia’s economy, the Federal Law #140-FZ «On the Voluntary Declaration of Assets and Bank Accounts/Deposits by Individuals and on Introducing Amendments to Various Legislative Acts of the Russian Federation» was adopted in June 2015