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Russia: Law amending CFC and corporate tax residence rules signed and published

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Russia: Law amending CFC and corporate tax residence rules signed and published

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The President of the Russian Federation signed on 29 December 2017, Law No. 436-FZ of 28 December 2017 (the Law), which amends the Tax Code and several legislative acts. The Law was thereafter published in the official government portal. It provides for the following main changes in controlled foreign company (CFC) rules:

  • the process of calculating the CFC taxable base for transactions involving financial assets is brought up to date with recent developments;
  • income derived from certain genuine transactions in derivative instruments will be considered as active income (CFC income is exempt if active income equals or exceeds 80% of the total CFC income);
  • the below actions performed in Russia by/on behalf of foreign companies will not be interpreted as evidence of Russian corporate tax residence:
  1. drafting minutes of meetings of the board of directors;
  2. drafting minutes of meetings of the shareholders;
  3. planning and administering activities of the foreign company by a related party; and
  4. administering works performed outside Russia related to the exploration or extraction of mineral resources;
  • implementation of rules on calculating the CFC taxable base of a foreign consolidated group;
  • enactment of rules on the CFC exemption for a multistage ownership structure;
  • introduction of taxation on individuals upon the sale of assets that were acquired after the liquidation of a CFC; and
  • extension of the list of activities of foreign companies that do not lead to a permanent establishment in Russia.

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