In February 2018, a set of laws aimed at prolongation of the capital amnesty procedure was adopted and became effective.
Particularly, the following legal acts were adopted, and it marked the continuing campaign on deoffshorization and amnesty of the Russian capital:
The first amnesty stage lasted from July 1, 2015 to June 30, 2016. Following the results of the first stage, taxpayers (subject to provisions of the amnesty law granting guarantees and preferences) are divided into the following groups:
As one of the arguments, the third group expressed assurance that Russian regulatory authorities would not have an instrument of getting data from abroad, that services of automatic data exchange would not work, and that in the end, everything would remain unchanged.
However, under current circumstances when:
Let us review some key aspects and peculiarities of filing tax returns set out by new amendments.
As usual, the same as in compliance with the first stage, one may specify data on:
The new feature in terms of objects for declaration purposes is an opportunity to declare not only foreign accounts open as of the filing date (as before), but also accounts already closed by the filing date. The only requirement is as follows: accounts have to be opened before 01.01.2018.
Any individual regardless of their citizenship or tax residency may file a special tax return. Moreover, filing a special tax return as part of the first stage does not prevent them from filing a special tax return as part of the second stage. The filer may deliver a tax return in person or by proxy acting under the notarized power of attorney. However, filing a tax return by post is not stipulated by the law.
According to adopted innovations, a tax return may be filed to any tax authority upon the filer’s choice (previously, tax authority at the filer’s place of residence/registration) or to the central office of the Federal Tax Service of Russia.
A special tax return may be filed as part of the second amnesty stage within the time period from March 1, 2018 to February 28, 2019.
Guarantees granted to the filer include exemption from criminal, administrative and tax liability for a number of crimes/offences committed during acquisition, use or disposal of property and/or foreign companies under control, as well as during crediting bank accounts (deposits).
Exemption from criminal liability covers the following crimes:
Exemption from administrative liability is limited to the following administrative offences:
Besides, the filer is exempt from the tax liability for:
It should be noted, that guarantees regarding tax exemption (collection of tax arrears) do not exempt from taxes on retained earnings of foreign companies under control.
Moreover, tax arrears accumulated before 01.01.2018 are not subject to collection. Given that the due term for personal income tax expires on July 15 of the year following the year of income gain, an individual may be granted income tax exemption as part of amnesty only for income gained before 31.12.2016. In case income was gained during 2017, then an obligation to declare and pay taxes appeared in 2018, therefore, such transactions are not covered by guarantees.
As for the exemption from liability for illegal foreign exchange transactions on foreign accounts reported in the tax return, all transactions carried out on such accounts before filing a tax return are deemed legal.
Key differences between the first amnesty stage and the second one are presented in the table below:
Amnesty was not the only procedure prolonged by the legislator. One more procedure closely connected with the process of deoffshorization was prolonged, i.e. tax-free liquidation of foreign companies under control.
The said procedure makes it possible to liquidate any foreign company under control with no adverse consequences for the controlling person and receive assets of such company. Acquisition of such assets is not recognized as personal income for tax purposes, and upon future re-sale of such assets such individual may apply tax deductions (tax base reduction by the asset value determined in accordance with accounting records of the liquidated foreign company under control as of the liquidation date).
Earlier, the deadline for liquidation of a foreign company under control and acquisition of assets tax-free was set until 01.01.2018.
Adopted amendments prolong this procedure until 01.03.2019.
Besides, earlier exemption on tax-free liquidation covered only property (cash excluded), while now cash is also recognized as assets which may be acquired by the controlling person tax-free upon the liquidation of a foreign company under control.
Without any doubt, adopted amendments are treated as favourable because they enhance opportunities of taxpayers to use guarantees and indemnities. Nevertheless, the rationale for participation in the second amnesty stage, as well as implementation of tax-free liquidation procedure, may be determined only after a detailed analysis and review of such factors as the structure of assets, history and procedure of their acquisition, exposure to liability risks and their valuation, etc.
[1]https://www.vedomosti.ru/economics/articles/2017/12/22/746232-amnistiyu-kapitalov.
[2]https://www.rbc.ru/newspaper/2018/02/01/5a71d7fd9a79470410e91497.
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