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Significant changes to Russia’s tax code could lead to an increased use of corporate and trust entities based in the Channel Islands in the structuring of Russian corporate and private wealth arrangements.
The changes, dubbed the 'deoffshorisation law', are intended to tax the profits made by controlled foreign companies and other non-Russian structures in a similar manner to that seen in many countries around the world. In addition, the new rules require the disclosure of beneficial ownership interests in non-Russian structures and provide a framework under which a foreign structure might itself become tax resident in Russia.
"What these new controlled foreign company rules, which came into effect on 1 January 2015, mean is that undistributed profits made by a foreign company, trust or other structure, which is controlled by a Russian tax resident, will be liable to profit tax in Russia, and in certain circumstances the entities themselves may be deemed Russian tax resident," said Collas Crill group partner Nicholas Davies.
"We believe that this will see an increased use of structures such as cell companies, foundations and trusts for Russian tax planning going forward, and jurisdictions like Guernsey and Jersey, which have a reputation for the quality and flexibility of such products and the on-island services that accompany them, will ultimately benefit.’
Nick added that the new Russian tax rules offered both opportunities and challenges to the Channel Islands.
"Russia and the wider CIS region continue to be a significant source of business for those involved in the structuring of offshore corporate, finance and private wealth arrangements in the Channel Islands but it’s important that they understand the implications of these tax code changes, as well as the effect of sanctions and the current economic and geo-political environment that Russia finds itself in," said Mr Davies.
To look at these opportunities and the challenges in more depth, Collas Crill has organised a seminar as part of its Spring Seminar Series.
"It will provide an excellent opportunity to hear from speakers from the legal, tax and accounting worlds on the new controlled foreign company and tax residency rules introduced by Russia, and their potential impact on the use of Channel Islands structures by Russian tax residents going forward. We will consider the effect of sanctions and the political and economic backdrop more generally, and discuss some of the opportunities and challenges in doing business in Russia and the CIS in the current climate," said Mr Davies.
Mr Davies will be joined on the panel by chartered accountant and UK licensed insolvency practitioner Alan Roberts whose experience includes Protected Cell winding ups, contentious insolvency issues, complex asset recovery, forensic accounting investigations and multi-jurisdictional insolvency litigation cases, and Neil Hoolahan whose expertise is in international tax compliance and advice for collective investment vehicles, trusts and offshore companies.
The event will be held in Guernsey on Tuesday 14 April at the Duke of Richmond and in Jersey on Wednesday 15 April at Pomme d’Or Hotel. More information is available from events@collascrill.com
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