What should you do in Russia after registering a company?

An individual or legal entity is required to notify the tax authority at the location (place of residence) of controlled foreign companies in relation to which it is a controlling person (clause 3.1 of Article 23, subclause 2 of clause 1 of Article 25.14 of the Tax Code ). This is a different type of notification, which differs from the notification of participation. Submission of the previous notification does not cancel the obligation to submit a notification of a CFC.

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A CFC is recognized as a foreign organization that simultaneously satisfies all of the following conditions (clause 1 of Article 25.13 of the Tax Code of the Russian Federation):

• the organization is not recognized as a tax resident of the Russian Federation;
• the controlling person of the organization is the organization and (or) individual recognized as tax residents of the Russian Federation.

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The following persons are recognized as controlling persons of a foreign organization (clause 3 of Article 25.13 of the Tax Code of the Russian Federation):

• a person whose share in this organization is more than 25%;
• a person whose share of participation in this organization (for individuals - together with spouses and minor children) is more than 10%, if the share of participation of all persons recognized as tax residents of the Russian Federation in this organization (for individuals - together with spouses and minor children) is more than 50%.

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A controlling person is also recognized as a person who does not meet the above criteria, but who actually controls the organization in his own interests or in the interests of spouses and minor children.

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Time limit and procedure for filing notification

The deadlines for filing notifications differ:

• for legal entities - until March 20 of the year following the tax period in which the controlling person recognizes income in the form of CFC profit.
• for legal entities - until April 30 of the year following the tax period in which the controlling person recognizes income in the form of CFC profit.

The date of recognition of income of an individual in the form of profit of a CFC is December 31 of the calendar year following the tax period, which includes the end date of the period for which, in accordance with the personal law of such a company, financial statements for the financial year are prepared.

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For example, if a company is incorporated on May 30, 2022, and its financial year is the calendar year from January 1 to December 31. Then the date of recognition of income in the form of CFC profit will be December 31, 2023. Then the individual must submit reports by April 30, 2024.

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If the financial year of this company, for example, is from April 1, 2022 to March 31, 2023, then the date of income recognition will be December 31, 2024. And the deadline for filing a notification of a CFC for an individual is April 30, 2025.

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Along with the notification, the following must be submitted:

• financial statements of the CFC with translation into Russian;
• auditor's report on the financial statements of a CFC with translation into Russian.

Liability for failure to notify

Failure to submit a notification or violation of the deadline is punishable by a fine of 500,000 rubles for each CFC (clause 1 of Article 129.6 of the Tax Code of the Russian Federation).

Payment of taxes

If the profit of a CFC exceeds 10 million rubles, then such profit is taken into account in the tax base of the founder in the corresponding share. From this profit, it is necessary to pay income tax or personal income tax, as if this profit of a CFC was the income of an individual or legal entity.

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In this case, the following amounts are deducted from the CFC profit for inclusion in the tax base:

• dividends paid by a CFC, taking into account interim dividends;
• dividends, the source of payment of which are Russian organizations, if the controlling person of this CFC has the actual right to such income

There are also a number of grounds on which the profit of a CFC is exempt from taxation. Among them:

• CFC is formed in accordance with the legislation of the EAEU. For example, in Armenia, Kazakhstan.
• the effective tax rate on the profit of a CFC is not less than 75% of the weighted average tax rate on corporate income tax.

The taxpayer must pay the tax on the profit of a CFC within the following deadlines:

• individual - until July 15;
• legal entity - until March 28.

Liability for non-payment of tax

A fine of 20% of the amount of unpaid tax, but not less than 100,000 rubles.

Tax residency

Russian organizations will always be considered tax residents of the Russian Federation (Article 246.2 of the Tax Code of the Russian Federation). However, individuals may lose their tax residency if they stay outside the Russian Federation for more than 183 days within 12 consecutive months (Clause 2 of Article 207 of the Tax Code of the Russian Federation). It is important that the day of departure from the Russian Federation and the day of return are considered days of stay in the Russian Federation (Letter of the Federal Tax Service dated 24.04.2015 No. OA-3-17/1702). In addition, the days of stay in the Russian Federation include travel outside the Russian Federation for short-term (less than six months) treatment or study (Clause 2 of Article 207 of the Tax Code of the Russian Federation).

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If a person has lost their tax residency status, they do not have to submit a notification of participation in foreign companies and a report on CFCs. At the same time, Russian legislation does not require notifying tax authorities of the loss of tax residency in the Russian Federation.

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Currency residency

Russian organizations and citizens of the Russian Federation are always currency residents of the Russian Federation. However, a number of obligations do not apply to persons who have lost their tax residency. Thus, they do not have to submit a notification of opening accounts abroad, or submit reports on the movement of funds on them.

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