Are you aware of a tax-free liquidation of the CFC?

Since the State Duma in the Russian Federation has passed the rules on controlled-foreign companies (“CFC”), there is an existing trend among Russian taxpayers on liquidation of the CFCs.

A tax-free liquidation of a CFC became possible after the President of the Russian Federation signed a Federal Law No. 32-FZ on February 15, 2016 on amendments to the Russian Federation Tax Code (regarding taxation of profits of Controlled Foreign Corporations and Income of Foreign Entities) (“Law”).

Under the Law, assets of the CFC (excluding funds), distributed to the shareholder, as the liquidation proceeds, are exempt from tax. In other words, Russian Law permits the transfer of assets of the liquidated CFC to a controlling person (physical person, tax resident of Russia) without tax consequences for the latter.

To be eligible for this incentive:

1) The CFC should be liquidated (dissolved) before January 1st, 2018. In Cyprus, typically, 9-12 months are needed to liquidate the company. However, with competent assistance the effective term can be reduced to 2 months. A strike off procedure is not applicable for a tax-free liquidation.

2) The controlling person should submit an application for a tax exemption, including description and value of the assets received (on the date of their receipt) to the Russian tax authorities.

Eurofast has many years of experience in providing corporate services in different jurisdictions. We perform all formalities required by the legislation for incorporation of companies as well as their liquidation in all of the jurisdictions in which we maintain offices, as well as in the UK, UAE, BVI, Belize, Seychelles and many other jurisdictions. Thus, we are ready to assist clients with the liquidation of their CFCs, regardless of the jurisdiction, and to follow-up a further process of claiming a tax exemption, granted by the Russian Law.

Our network of associates, including Russian law firms, experienced in CFC issues, will assist clients with preparing and filling an application and any other documents required for the tax exemption.

Alena Malaya
Tax and Legal Advisor
Direct tel: +380 44 278 12 66