9 August 2018331

Russia creates its own offshore and only for foreign companies.

At the end of July, the bill on the establishment of special administrative districts on Russky Island in Primorye and the October Island in Kaliningrad was adopted in final reading. In fact, Russia began to organize domestic offshore companies, which are aimed only at foreign companies.

In a record short time in Russia, a package of laws was adopted to create Special Administrative Regions (SAR) or, as they are more often called, domestic offshore companies. The entire procedure took only 10 days: on July 18 the bill was passed in the first reading, and 26 - in the third. July 28 it was approved by the Federation Council.

At the same time during the discussions the law was amended, which confirms the worst fears of experts: the authorities decided not to allow Russian companies and entrepreneurs to enter the SAR. Only foreign companies can apply for registration. The amendment was made before the second reading. By the way, only one day passed between the second and third reading.

Initially, the bill expected to form an attractive investment environment for foreign and Russian investors. However, at a meeting with the president in the first half of July, the Central Bank and the Kremlin's expert department insisted that access to the UAP should be restricted. This was explained by the fact that Russian companies will rush into established ATS and this will create risks for currency control. There is no exchange control in the SAR.

In general, the SAR is being created with a view to de-fogging the assets of Russians and providing favorable holdings for Russian-owned holdings owned by Russians against the backdrop of international sanctions.

Who has the right to register in Russian offshore?

Russian companies were officially deprived of the opportunity to register in the Russian offshore. Such a possibility in the future is considered as real, but first you need to conduct tests.

However, not all foreign companies can claim a privileged place near the Kaliningrad or Primorsky sun. To get the status of an international holding company, along with tax incentives, it is necessary:

  • Confirm that the company is registered before January 1, 2018;

  • Prove that the controlling persons were such until January 1, 2017;

  • It is mandatory to change jurisdiction to Russian (redomitsilatsiya);

  • Invest as an investment of 50 million rubles for six months from the date of registration;

  • Show that the company was registered or established in a state member of the FATF or the Council of Europe's Committee of Experts on the Evaluation of Anti-Money Laundering and Terrorist Financing Measures (MONEYVAL).

Complete the process of liquidation of a foreign company in a period of up to six months or at the time that is prescribed in the law of foreign jurisdiction, if it is more than six months.

At the insistence of the Central Bank in the SAR, it is prohibited to re-register banks, payment systems and other organizations subject to CB regulation.

What are the benefits offered by Russian offshore companies?

What are the advantages of SAR in Russia? The first thing is 0% tax on income received in the form of dividends and from the sale of assets. For dividends on shares of international companies that were public at the time of issue, a tax of 5% is set.

In the territory of the RAA there is no currency control, which means that any operations with the currency can be carried out without restrictions.

Access to information about the beneficiaries will be obtained only by the management company, whose functions on the stratum will be performed by the designated state bodies, as well as supervisory bodies and courts.

Who will take advantage of the proposal of the authorities?

Experts believe that the main group of stakeholders is the owners of companies that have fallen under American and European sanctions. Sanctions re-registration will not remove, but will facilitate the tax regime.

Also there is an opinion that Russian offshore companies can attract foreign investors who are not Russians. It is noted here that you will have to compete with other, much more well-known and proven offshore companies. Moreover, there are no cardinal advantages and differences in Russia, and there is no credibility with the judiciary either from the Russians or, especially, from foreign investors.

Unless they assume that Japanese entrepreneurs will take advantage of the opportunity and register companies in Primorye to work in Russia.

Despite all the assumptions, it is not yet clear whether the CAP program will be anyway popular. There are fears that it will become another black hole in the economy and a failure. All previous attempts to create offshore in Russia ended with proceedings and closing of projects.

In addition, the initiative is in no way designed and no one can even say roughly what figures of direct and indirect revenues the state expects. The view is voiced that the authorities only protect the interests of a small group of oligarchs, protecting their assets, but without providing benefits to the entire state.