Changes In Taxation For Controlled Foreign Companies

• Published date: 04 June 2021
• Subject Matter: Corporate/Commercial Law, Tax, Corporate and Company Law, Income Tax, Corporate Tax
• Law Firm: GRATA International
• Author: GRATA International

On 21of October, the Draft Law "On Amendments to Parts One and Two of the Tax Code of Russian Federation", was adopted in the second reading. second reading in the State Duma. Subsequently, it was adopted in the third reading and sent to the Federation Council Committee on Budget and Financial Markets and Policy.

This proposal for improving the legislation of Russian Federation is intended to eliminate uncertainty in the application of the investment tax deduction. That should become an incentive for increasing of business activity in Russian Federation.

To achieve these goals, a number of changes to the current legislation were proposed:

1) Define the concept of a foreign holding (sub-holding) company. If a foreign company simultaneously observes a number of conditions, it will be recognized as a foreign holding or sub-holding company. The prerequisites include the following:

1. 75% in the authorized (pooled) capital (fund) of a foreign organization must belong to:

- Russian organization - in case of recognition as a holding company;

- a foreign holding company - for recognition as a sub-holding company;

2. 50% participation in at least one other foreign organization;
3. at least a year of ownership of mentioned shares.

2) Exclude dividend income...