Range Of Benefits For Companies Domiciled In SARs Significantly Expanded

• Published date: 08 June 2021
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Tax, Corporate and Company Law, Money Laundering, Tax Authorities
• Law Firm: Gorodissky & Partners
• Author: Mr Valery Narezhny

Introduction

In 2018 Russia adopted Federal Law 290-FZ on International Companies and International Funds, which introduced the possibility for foreign companies to 'redomicile' (ie, change their personal law from foreign law to Russian law) for the first time. Having decided to redomicile, a foreign company can 'move' to Russia, ceasing to exist in the country of initial registration and transferring its activities to Russia in accordance with its legislation. In doing so, the company retains its status, structure, property and other rights and contractual obligations.

However, a foreign company cannot redomicile to the territory of Russia - only to one of its special administrative regions (SARs):

• Oktyabrsky Island (Kaliningrad Region); or
• Russky Island (Primorsky Region).

These SARs are 'internal' offshore zones to which companies can move from 'external' offshore zones.

Requirements

Several requirements must be met in order for a foreign company to redomicile to Russia:

• it must be a commercial corporate entity;
• the law of the country where it was initially registered must allow a change in the company's personal law and re-registration in another jurisdiction; and
• on being redomiciled to Russia, the company must submit confirmation of its exclusion from the register of legal entities in the country of initial registration.

IHC status

After redomiciliation, a foreign company may obtain the status of an international holding company (IHC), which entitles it to certain benefits. In order to obtain IHC status, a company should:

• be initially registered (established) in a country that is a member or observer of such anti-money laundering international organisations as the Financial Action Task Force (FATF) and MONEYVAL;
• carry out business activities in the territory of several countries (including Russia), directly or through controlled persons;
• file an application to conclude an agreement on operating as an SAR participant; and
• undertake to invest at least Rb50 million in Russia. Such investments may be both direct, in the form of investments in productive assets, or contributions to the authorised capital of Russian organisations.

Initially, the law also provided for the collection of an annual registration fee from IHCs, which was to be enshrined in the Tax Code. However, the relevant provisions have yet to be introduced into Russia's tax legislation, so this fee is not being collected at present.

If an IHC was established in the country where it...