By Olga Boltenko, Evgenia Martin, and Ayshat Gaydarova

On the 18th of March the Russian Ministry of Finance published a draft law on anti-offshore measures. Following wide public discussion, a revised draft was published on the 27th of May. The Draft introduces four key concepts:

• Controlled foreign companies (CFC) rules;
• Russian tax residence for foreign companies, based on tests of management and control;
• Concepts of ‘factual right to income’ and ‘beneficial owner’ in the context of applying international tax treaties; and
• New rules on taxation of the indirect disposal of Russian real estate.

Implementation of the CFC rules will provide the Russian tax authorities with legal mechanisms for taxing international corporate and private structures controlled by Russian individuals and corporate tax residents (irrespective their nationality). Implementation of other concepts will have an impact on any structure with any degree of Russian involvement, irrespective of the tax residency of its beneficiaries.

It is strongly recommended that all Russian tax residents, and anyone with a business connection with Russia, should review and revise their corporate and private international arrangements as a matter of urgency.

Below we examine the key provisions of the Draft, which it is expected will be implemented in 2014 and start applying in 2015.