Could Russia be the New "Offshore"

FOR IMMEDIATE RELEASE
(Free-Press-Release.com) April 19, 2010 -- So the governments of the West have branded tax evasion a sin. Nobody, regardless of the individual, will be exempt from this 'fight against evil'.

The law enshrines the principles of tax residence, which is much more important than a registered residence and nationality of a passport holder. The U.S. State Department has ordered intelligence agencies and tax authorities to collect information on the investments of U.S. tax residents within that country through foreign banks. Failure to disclose information about the details of such investments through foreign front men is a serious criminal offence. In 2001, the United States introduced a system of exchange of information on financial affairs of its citizens with an overwhelming number of offshore companies and financial centres. In 2007 they established a confiscatory tax on departure (Exit Tax), similar to what had existed in Germany in the 1930's and after in the USSR. In 2008 they authorised partial confiscation of the global assets of wealthy individuals emigrating from the United States.
In contrast Russian proprietors of offshore assets piously believe in the protection of assets using these structures and Russian authorities are encouraging them.

Ninety percent of transactions on the Russian raw commodities exchange pass through offshore jurisdictions. 9 out of 10 of Russia's largest domestic companies which are part owned by the state have been registered offshore with fake beneficiaries, the genuine beneficiaries; the monopolies, bureaucrats and possibly gangsters all hiding in the shadows. Here and now we have a very real threat of the seizure of strategic sectors of the Russian economy by an unreported change of beneficiaries or the verdict of a local court on a faraway exotic island and as a nation we are probably not alone in that.

The tax departments of developed countries are inventive in their competition for keeping rich tax payers in the tax system. To the contrary, Russia uses an extremely primitive test for tax residency for both physical and juridical bodies, helping mobile members of the Russian elite to easily avoid and evade the payment of taxes in their native country. We do not have a controlled foreign corporation (CFC ) regime, thanks to that our anonymous beneficiaries hold the capital taken out abroad in a personal offshore purse, not reporting it to the Russian Federation. For a long time the Ministry of Finance has had plans to introduce two new criteria into the legislation for definition of a tax residency: “ a place where actual management of the company takes place ” and “ residency of beneficiaries of the company ”. At the same time any organisation that is registered offshore would pay an additional profit tax in to the budget of Russia. For this purpose it is necessary to subtract the sum already paid offshore (possibly Nil) from the current rate of tax in Russia but the Ministry of Finance recognizes that any acceptance of these measures will need massive political support

Tatiana Bulakh
Tax Partner
Formcos-Russia.eu

More information can be found online at http://www.formcos-russia.eu

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