Expertise/Tax

Service

CFCs and International Taxation

The ownership arrangements determine whether CFC notifications and notifications of participation in a foreign organization need to be filed. The Russian tax consequences of foreign structures and of payments abroad are examined separately.

We are most often instructed by:

  • Owners of foreign companies and structures
  • Owners planning to set up a foreign structure
  • Companies with foreign participants and cross-border payments

The information on this website is provided for information purposes only and does not constitute a public offer.

What the Service Includes

Timing and Fees
–timing on request
from ₽fee on request

Timing and fees are indicative and are confirmed when the engagement is agreed.

01 / Overview
Obligations of controlling persons

CFC issues arise where Russian tax residents participate directly or indirectly in foreign companies and other structures. Controlled foreign companies and controlling persons are identified on the basis of the actual ownership arrangements, and this is where the analysis begins: stakes, the manner of participation and the tax status of the owners.

The work covers the Russian side of the matter: the obligations that arise for Russian tax residents. Where necessary, questions of foreign tax law are worked through with specialists in the relevant jurisdiction, and the positions are brought together.

02 / Outcome
Service Outcome
  • Status assessmentA conclusion as to whether the obligations of a controlling person arise under the existing ownership arrangements.
  • Prepared notificationsNotifications of participation and CFC notifications with supporting documents.
  • Analysis of tax consequencesThe Russian tax consequences of ownership, payments and changes to the structure.
  • Written positionA position on an international taxation issue, describing the circumstances on which it is based.
  • Next stepsA list of documents to be prepared and filed, with the order in which actions are to be taken.

The outcome of the service is the work performed within the scope agreed with the client.

03 / Preparation
What the work is built on

  1. Materials

    The work is built on the documents and information of the company and its owners; the following points are relevant.

    • Ownership arrangementsForeign companies and structures, stakes, participation held personally or through Russian organizations.
    • Tax statusThe tax residence of the owners and the other participants in the structure.
    • DocumentsConstituent documents, financial statements of foreign organizations, notifications previously filed.
    • TransactionsPayments, financing, forthcoming changes.
    • Positions previously obtainedOpinions and correspondence with the tax authorities, if any.
    • Purpose of the requestA one-off question, preparation of notifications or ongoing support for the structure.

  2. Assessment

    On the basis of the materials, the risks, the possible solutions and their consequences are identified.

  3. Plan

    For the chosen option, a plan is drawn up: the sequence of steps, timing and scope of work.

04 / Projects
Selected Projects
01 / 02

Division of a business

Tax consequences of dividing assets on exit from a partnership

Challenge

When the partnership came to an end, the assets were redistributed between the parties. A direct division of the assets would have had significant tax consequences for both parties.

What was done

The exit structure was worked through separately and reconfigured in the light of the legal characterization of each transaction and its tax consequences. The balance of the parties' interests was preserved in the process.

Foreign Trade Contracts

Tax and currency aspects of international sale contracts

Challenge

A Chinese company required a legal review of contracts for the international sale of goods between China and Russia.

What was done

Alongside the applicable law, the delivery terms (Incoterms) and the dispute resolution procedure, the currency and tax aspects of the contracts were analysed. The risks were identified and eliminated before signing.

05 / Questions
Frequently Asked Questions

The ownership arrangements are examined, and it is determined which obligations have arisen and which of them have not been fulfilled.

After this, the notifications and supporting documents are prepared, and further steps are discussed in the light of the situation as it stands.

The termination of participation is reflected in notifications, which are filed in the prescribed manner together with supporting documents.

The set of documents depends on the method of exit and on which obligations arose previously.

An individual may be a controlling person, and the obligations to file notifications and to account for CFC profits then arise for that individual personally; their scope is determined by the ownership arrangements.

Where the company and its owner are linked by a single structure, their obligations are examined together.

The proposed model is examined, and the Russian tax issues to be taken into account in implementing it are identified.

At this stage it is still possible to choose how it is to be structured.

The specific payment is examined: the type of income, the parties and the applicability of a double taxation treaty.

Applicability is checked as at the date of instruction, and a position on how the payment is taxed is then prepared.

An hourly rate, a fixed fee or a combined model is used; in some cases part of the fee depends on the outcome achieved. The fee is determined by the time actually spent, the complexity of the matter and the overall timeframe of the project, and is agreed before work begins.

Key Contacts
Deni Murdalov Deni Murdalov Partner, PhD (Law), LL.M.

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