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Legal update No 632

Goltsblat BLP advises that two draft laws (Nos. 377595-7 and 377596-7) of utmost importance for delivering on the Russian President’s initiatives to extend the term for the “capital amnesty” and “tax-free wind-up” were submitted to the State Duma on 30 January 2018.

Under the capital amnesty (rolled out in Russia from 1 July 2015 through 30 June 2016), individuals who voluntarily declared their real estate, vehicles, securities, foreign bank accounts and controlled foreign companies (“CFC”) would be released from tax, administrative and criminal liability for evading taxes or customs duties or for failing to comply with the currency regulation and control laws applicable to such property (property sources), bank accounts and CFC.

Tax-free wind-up, introduced in the provisions for transitioning to the CFC rules, offered Russian tax residents (individuals and companies) a chance to liquidate their CFCs by 1 January 2018 and obtain their property tax-free (apart from cash for individuals).

In sum, the draft laws state as follows:

  • The tax-free wind-up period has been prolonged until 1 March 2019, with the second stage of voluntary disclosure now running from 1 March 2018 to 28 February 2019;
  • No personal income tax will be levied on income derived, now either in kind or in cash, on a CFC wound up by 1 March 2019 (with retroactive effect from 1 January 2016);
  • Those who filed a special declaration during the first voluntary disclosure stage may now do so again and reap the new benefits;
  • Accounts may be declared that were opened before 1 January 2018 but were closed by the special declaration filing date;
  • No taxes will be collected with respect to acquisition (building up the relevant sources), use or disposal of property (property rights) or CFC or remittances to foreign accounts disclosed in the special declaration, apart from taxes on CFC profits and/or property;
  • The declarant may choose to file the special declaration with any tax authority or Russia’s Federal Tax Service;
  • A notice of an interest in a foreign entity and/or of a CFC filed together with the special declaration will not be deemed filed beyond the deadline if such foreign companies are disclosed in the declaration.

We will keep you posted on key updates and developments in this area as they come in.

Goltsblat BLP Tax Practice has an impressive track record in legal advisory services, including in tax and currency control. We are perfectly positioned and would be happy to advise you on any capital amnesty declaration matters and/or assist with preparing and filing such declarations.

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