Services for controlled foreign companies (CFC)
CFC risk optimization
- We study the business structure to determine which companies may be CFC;
- We help preparing notices of participation in foreign organizations and CFC reports;
- We conduct an analysis to determine whether CFC can be exempted from tax in Russia;
- We explain what documentation needs to be prepared for CFC;
- We audit CFC according to international standards;
- We determine the profit tax payable for CFC.
CFC requirements in Russia
Tax residents of the Russian Federation must report their participation in foreign companies, and under certain conditions, pay CFC profit tax in Russia.
When a tax resident of the Russian Federation is exempt from CFC profit tax
Profit tax exemption arises in the following 3 cases:
- CFC profit does not exceed a certain threshold;
- CFC are exempted from profit tax due to the nature of their activity;
- CFC are exempted from profit tax depending on their tax burden in the country of registration.
CFC taxation options
If CFC are subject to taxation in Russia, then profit will be calculated as follows:
- According to general rules as set out in Chapter 25 of the Russian Tax Code (based on tax registers);
- Profit before tax as specified in financial statements.
Conditions to use financial statements for determining the tax base
Financial statements may be used to determine the tax base provided a number of conditions set out in the Russian Tax Code are met, namely:
- A double taxation treaty has been signed between the Russian Federation and the country in which CFC is registered;
- Tax information is exchanged between the Russian Federation and the country in which CFC is registered;
- The financial statements of CFC have been audited in accordance with international standards.
The calculation of CFC profits must be documented in accordance with the requirements of the Russian Tax Code, and CFC profits are included in the tax return of the controlling entity which is a Russian tax resident.
- March 20 – deadline for submission of CFC reports;
- March 28 – deadline for submission of profit tax return including CFC profits.
Fines and penalties
- RUB 100,000 per CFC – for failure to submit CFC reports;
- RUB 100,000 per CFC – for failure to submit notices of participation in foreign organizations;
- 20% of unpaid tax amount – for non-payment or partial payment of CFC profit tax.
Our specialists have extensive experience in tax consulting on CFC issues, calculating the tax base, and preparing documentation in accordance with Russian tax law. Feel free to contact us for advice.