Controlled Foreign Companies (CFC)

The Tax Code provides for taxation of the retained earnings of foreign organizations in the Russian Federation being controlled by Russian organizations and / or individuals.

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A legal entity or an individual shall be regarded as a controller of a foreign company, if it / he / she:

  • owns the equity share in the foreign organization > 25%;
  • owns the equity share in the foreign organization > 10%, if the equity share of all tax residents of the Russian Federation in the foreign organization is > 50%;
  • an individual controls the organization in his / her interests or in the interests of his / her spouse or underage children.

The controller shall:

  • if the equity share in the foreign organization is > 10%, submit the notification of the interest in foreign organizations to the tax authority (not later than within three months from the date of occurrence (change) of the equity share);
  • submit the notification of CFC to the tax authority (not later than on March 20 of the year following the tax period, in which the controller recognizes the income in the form of CFC earnings);
  • in case of the CFC earnings, include them in the income tax return (for organizations) or NDFL (Personal Income Tax) declaration (for individuals), except for the cases established by the Tax Code.

ICLC Services with regard to CFC:

  • determination:

— whether the legal entity or the individual is a controller of a foreign organization;

— whether the CFC earnings are subject to exemption from taxation in a particular situation;

  • defining of the CFC earnings subject to inclusion in the tax return of the controller;
  • preparation of the notification of interests in the foreign organizations;
  • preparation of the notification of CFC;
  • filling in the respective sections of tax returns;
  • consultations on the matters related to CFC.