Russian «Offshores»: history and modernity

Business is primarily about efficiency. Profits should be maximized, expenses should be minimal, and capital should be protected. To minimize the tax burden and protect capital, free economic zones or, as journalists like to call them, «Offshores»are used all over the world. Cyprus, the Bahamas and Malta «Offshores» are widely known throughout the world. But Russia has its own history of creating and functioning such entities.

History

The history of preferential tax zones in Russia begins almost from the moment when the USSR collapsed and the first steps of the new state on the path of a market economy. The first attempts to define the concept of a free economic zone in the new reality appeared in the law on foreign investment adopted in 1991. According to this law, the status of a free economic zone was assigned to an entire region of the country at once, becoming a territory with preferential taxation. This decision of the then inexperienced young Government of Russia was wrong because according to international standards, such zones require huge investments for their improvement, for the organization of customs, administrative, accounting and trade activities. It is almost impossible to meet all these requirements on the vast territory of the entire region.

Until 2005, Russia did not have a General Federal law regulating the status of free economic zones, the procedure for their creation and operation. All these issues were regulated by various regulations created for each specific zone. From 1991 to 2005, about fifty different regulations establishing free economic zones were adopted. The mode of their functioning, the organization of control and administrative mechanisms and the benefits provided to residents were also different. This situation created a wide field for various abuses and criminal schemes around the free economic zones of that time.

In 2005, after the adoption of Federal law No. 116-FZ «On special economic zones in the Russian Federation», this system changed radically. A huge number of previously created zones were eliminated. They were left only in two regions — the Magadan and Kaliningrad regions. The same law introduced a new type of preferential territories — special economic zones. Unlike free economic zones and other areas, the new territories were not intended to attract any business to a particular region, but to ensure innovative, technological and infrastructural development of the economy.

Special economic zones were graded according to their purpose:

  • technical and implementation;
  • industrial-production;
  • tourist and recreational;
  • seaport.

Then, as the government began to understand and develop this topic, new forms of tax havens began to be created.

A wave of creation of technoparks and technopolises swept across the country, in 2010 the IC «SKOLKOVO» was created, in 2011 they began to create zones of territorial development everywhere, then came the turn of territories of advanced socio-economic development, and finally after the annexation of the Crimea, a free economic zone was created in the Republic of Crimea and Sevastopol, and almost simultaneously — the Free Port of Vladivostok.

Modernity

New solutions in the field of Russian «offshore» brought 2018.

It was decided to create special administrative regions in the Russian Federation. In support of this decision, on August 3, 2018, Federal laws came into force on the territory of Russia:

  • «On special administrative regions in the territories of the Kaliningrad region and Primorye territory».
  • «About international companies».
  • «On amendments to the Federal law» on currency regulation and currency control » in connection with the adoption of the Federal law «On special administrative regions in the territories of the Kaliningrad region and Primorye territory», the Federal law «On international companies».
  • «On amendments to parts one and two of the Tax code of the Russian Federation in connection with the adoption of the Federal law «on special administrative regions in the territories of the Kaliningrad region and Primorye territory», the Federal law «On international companies».
  • «On amendments to the merchant shipping Code of the Russian Federation regarding the creation of a Special ship registry in connection with the adoption of the Federal law «On international companies».
  • «On amendments to certain legislative acts of the Russian Federation in connection with the adoption of the Federal law «On special administrative regions in the territories of the Kaliningrad region and Primorye territory».

Special administrative regions were created on the territories of Russian island in the Primorsky territory and Oktyabrsky island in the Kaliningrad region. To date, 23 international companies have registered there.

Any international company registered in Russia as a redomicile and operating on the territory of several States, including Russia, can become a resident of the special administrative region. Features of functioning of the special administrative region:

  1. The ability to quickly relocate (redomicile) foreign companies to the Russian Federation, as well as transfer of shares of such companies to the Russian stock market.
  2. Features of calculating the tax base:
    • for income received by an international holding company in the form of dividends — 0%;
    • for income received by foreign persons in the form of dividends on stocks (shares) in international holding companies-5 %.
  3. International companies registered in special administrative regions are recognized as non-residents. This means that there are no restrictions on opening accounts with foreign banks and various cash flow reports.
  4. Confidential ownership and management of companies registered in special administrative regions. Such a company may submit an application that restricts access to information about the company’s members, its management, its affiliates, and their assets.
  5. Simplified registration of watercraft and aircraft in a special register. This will allow you to register a vessel in the shortest possible time and get the right to use the Russian flag on it.
  6. It is possible to apply foreign law and preserve the provisions of a corporate agreement that was previously drawn up in accordance with these rules.
  7. It is possible to determine the nominal value of a resident’s shares in a foreign currency.
  8. Residents have the opportunity without any restrictions to carry out foreign exchange transactions and transfers of currency between companies. Also this does not require opening of foreign currency accounts in Russia.
  9. Residents have the opportunity without any restrictions to carry out transactions with any securities.

The current special economic zone regime in the Kaliningrad region and Primorye territory, combined with the privileges of special administrative regions, provides the following additional benefits:

  • for the Payroll Fund-7.2% (instead of 30.2%);
  • land, property and profit taxes — 0 %;
  • customs duty — 0%;
  • import VAT without limitation of import volume — 0%.

Resident status is granted to a legal entity that:

  1. Carries out economic activities on the territory of several States, including the territory of the Russian Federation.
  2. Has committed to invest at least 50 million rubles in the Russian economy for the first 6 months of its stay as a resident.
  3. Registered in a state that supports measures to counter money laundering and terrorist financing.

The Russian Government is currently developing additional mechanisms to encourage foreign investors to become residents of special administrative regions. For example, it is planned to introduce «transit redomicilation» — a mechanism that will make it possible to obtain resident status even for companies from those countries whose legislation currently does not allow them to register in Russia. This process is planned to be organized through intermediate jurisdictions. That is, for example, a company from the United States is first registered in Cyprus, and then a Cyprus company – in the special administrative region. In addition, it is planned to completely exempt foreign branches of resident companies from taxes.

#оffshores #special_administrative_regions #tax_savings #predominate  #investments  #investment_consulting


Sergey Tyurenkov,
investment consultant, lawyer, curator of international projects of the «Academy of tourism, hospitality and restaurant business».

Оставить отзыв

Ваш адрес email не будет опубликован. Обязательные поля помечены *