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Russian Finance Ministry to demand taxes on Russian earnings in all jurisdictions

January 30, 2014, 20:25 UTC+3 30
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MOSCOW, January 30. /ITAR-TASS/. Russian Finance Ministry is planning to demand taxes on Russian companies’ earnings in all jurisdictions, Deputy Finance Minister Sergei Shatalov said in an interview to the Vedomosti daily.

“Taxation in most countries unlike that in Russia is based not on the jurisdiction where a company is set up but on how close the company and its businesses are linked to that country,” he said. “So a foreign company operating in another state but being managed from this state, under certain circumstances may be ruled its tax resident.” A tax resident status, he added, entails paying national taxes on all of the company’s earnings, not only gained in that particular state.

Shatalov added the Finance Ministry was planning to claim taxes on all earnings, less than paid in other states, that is, a company’s “tax liabilities will be formed under the rules that apply to any Russian company”. Shatalov believes the business itself, not the jurisdiction, is of primary importance for taxation.

The ministry is going to assume a rigid stance on the issue.

“Paired with tax residence, the new rules should help reveal more complicated business schemes, such as when a Russian citizen is a beneficiary of a foreign company, which, in turn, holds Russian assets,” Shatalov said adding such schemes were quite popular and Russian taxes should be paid on such foreign company’s undistributed profit.

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