Putin Signs Law to Crack Down on Offshore Tax Shelters

Vladimir Putin signs a law that limits offshore tax sheltering. The law will force Russian owners of foreign-based companies to inform the Federal Tax Service of their profits.

MOSCOW, November 25 (Sputnik) — Russian President Vladimir Putin has signed a law to limit offshore tax sheltering, according to a publication appearing Tuesday on the official database of Russian laws and legal documents.

The new law introduces an amendment to the Russian Tax Code that will force Russian owners of foreign-based companies to inform the Federal Tax Service of their profits. This modification introduces the notions of a "controlled foreign company" and a "controlling entity."

The controlling entity will be obliged to submit a tax declaration, a financial statement on the controlled foreign company and audit results. Taxes will be calculated with regard to the offshore company's income.

A separate provision in the "deoffshorization" law lists criteria that can classify a foreign company as a Russian tax resident. According to the Russian deputy finance minister, this could happen if a company's operational and strategic decisions are taken in Russia or if a company's income comes predominantly from operations in Russia.