Tax Digest for March 2025

Mark Gindileev

Apr 22, 2025

The Federal Tax Service reported a reduction in the number of controlled foreign companies of Russians

The number of foreign companies controlled by Russians (CFCs) as of the end of 2023 decreased by 9% compared to the level of 2022, to 41.4 thousand, after a rapid growth at the end of 2022 by 21%, to 45.6 thousand. These data are contained in the presentation of the Federal Tax Service (FTS) on the results of work for 2024, which was studied by RBC. 

The FTS presentation indicates that 98% of declared CFCs are foreign organizations. The remaining 2% are foreign structures: trust, partnership, fund, partnership, another form of collective investment or trust management. This ratio has not changed in recent years.

The reduction in the number of declared CFCs was recorded for the first time since the mechanism for controlling foreign assets was introduced in 2015. On average, they grew by 15% per year. In 2022, due to sanctions pressure, there was a surge in the declaration of CFCs. Among the main reasons, experts highlighted the following:

• capital amnesty (fourth wave)
• creation of companies in friendly jurisdictions for the purpose of organizing interaction with foreign counterparties
• increased fines for failure to fulfill obligations to submit notifications about CFCs (since 2021, the fine for non-submission or untimely submission of a CFC notification has been increased 5 times — up to 500 thousand rubles for each company). Failure to report such a CFC or lack of prepared financial statements for such a CFC may lead to a higher fine, which could stimulate more active disclosure of information.
• the decree of the President of the Russian Federation from September 2022, which allowed persons from unfriendly countries to conduct transactions with shares/units of Russian companies.

At the same time, the number of taxpayers who submitted a CFC notification to the tax authorities for 2023, on the contrary, increased by 12%, to 20.48 thousand people. Of these, 83% were individuals and 17% were legal entities, according to FTS data. 

Among the possible reasons for the reduction in the number of CFCs declared by Russians, the following can be highlighted:

• liquidation of old CFCs in jurisdictions that have become 'unfriendly'. Liquidation of CFCs may take a year or two, especially considering the need to transfer assets to other jurisdictions and undergo compliance there.
• loss of controlling persons' status as tax residents of Russia;
• withdrawal of assets from CFCs through 'tax-free asset transfer' (a tax benefit that allowed Russian tax residents to withdraw assets from CFCs without taxes until the beginning of 2025);
• increase in the 'fixed' tax on CFCs. Previously, it was possible to switch to paying a fixed tax of 5 million rubles for all CFCs, but in 2024 the legislation changed, and now 5 million rubles is paid for each CFC, up to the fifth.

The Bank of Russia updated the conditions under which an investor can obtain qualified status

These can be either standalone or combined recognition criteria. 

In particular, standalone criteria may include education and academic degree. Higher education in the specialty 'Finance and Credit' or master's programs 'Finance and Credit' or 'Finance', as well as the academic degree of candidate or doctor of economic sciences in the scientific specialties 'Finance, money circulation and credit' or 'Finance' will be taken into account.

Another standalone criterion is the average income over the last 2 years, which must be at least 20 million rubles per year. At the same time, money received from the sale of real estate is proposed not to be taken into account. This will minimize the risks of recognizing a person as a qualified investor with a one-time receipt of large sums of money.

In addition, a person can still obtain qualified investor status based on the asset criterion. Currently, it is about 12 million rubles, and from January 1, 2026, this amount will increase to 24 million rubles.

Also, qualified investor status can be obtained by combining higher education in specialty programs, for example, 'Theoretical Economics', in the master's program 'Economics' with income or asset criteria or investment experience in the financial market. The same combination is possible with the presence of an academic degree of candidate or doctor of economic sciences in the specialties specified on the Bank of Russia's website. In such combinations, it is proposed to reduce the income criterion and asset criterion to 6 million rubles per year. At the same time, from January 1, 2026, the asset criterion will increase to 12 million rubles per year.

Out-of-court tax collection procedure for individuals — amendments adopted in the first reading

The State Duma in the first reading adopted a government bill that establishes the procedure for out-of-court collection from individuals who are not individual entrepreneurs, of mandatory payments and the imposition of sanctions while maintaining judicial control in case of a dispute about the legality and validity of the claims presented.

The bill provides for the application of the out-of-court collection procedure in relation to tax, fee, insurance premium debts calculated by the individual independently (when submitting tax declarations, applying the special tax regime NPD). If the amount of debt is accrued by the tax authority based on a tax notification or a decision to hold accountable for a tax offense/decision to cancel (in whole or in part) a decision to grant a tax deduction, then the out-of-court procedure can be applied only in the absence of a dispute.

In turn, for cases of dispute, as well as forced collection of debt, the bill provides for appropriate procedural and procedural guarantees. A taxpayer who disagrees with the decision on collection can file a complaint with the tax authority (before going to court). During the consideration of the complaint, the collection will be suspended.

Taking into account the special legal status of taxpayers — individuals, the bill does not provide for the possibility of suspending operations on their accounts.

The Central Bank proposed to allow 'special' investors to conduct experimental cryptocurrency transactions

The Bank of Russia proposed to allow a limited circle of investors to buy and sell cryptocurrencies. For this, it is planned to establish a special experimental legal regime (ELR) for a period of three years, according to the Central Bank's statement.

It is assumed that transactions with cryptocurrencies within the ELR will be able to be conducted only by 'specially qualified investors'. This is a new status that, as expected, citizens will be able to obtain if their investments in securities and deposits exceed 100 million rubles or if their income for the past year exceeded 50 million rubles.

It is also proposed that companies — qualified investors under the current legislation, i.e., organizations professionally working in the stock market, such as banks, insurance companies, brokers, trust managers, non-state pension funds, and management companies of mutual investment funds, become participants in the experiment.

For financial organizations that wish to invest in cryptocurrency, the Bank of Russia plans to establish regulatory requirements taking into account the level and nature of the risks of such an asset.

Outside the experimental regime, it is planned to allow all qualified investors to invest in settlement derivative financial instruments (exchange contracts for price differences, without the actual transfer of assets between investors) securities and digital financial assets that do not provide for the delivery of cryptocurrency to investors, but their yield is tied to its value.

Tax exemption on personal income tax when selling shares (stakes in the authorized capital) of companies forcibly redomiciled to Russia

From January 1, 2025, the procedure for exempting from personal income tax income from the sale of shares in Russian companies, as well as shares based on the holding period (paragraph 17.2 of Article 217 of the Tax Code of the Russian Federation), has changed. The exemption does not apply to the amount of income in the form of a tax base for such transactions exceeding 50 million rubles. At the same time, Presidential Decree No. 73 of January 24, 2024, provides that if individuals — tax residents of the Russian Federation, who have entered into direct ownership of forcibly redomiciled companies, subsequently sell such shares/stakes, then the provisions of the Tax Code of the Russian Federation on exemption from personal income tax based on the holding period will apply to them in the 'old' version, i.e., without taking into account the above restrictions. The Ministry of Finance of Russia in its explanatory letters No. 03-04-07/117849 and No. 03-04-06/118867 confirmed this position.

A project was submitted to the State Duma to address the issue of increased taxes for shareholders of forcibly redomiciled companies

According to the current version of the Tax Code of the Russian Federation, special rules for calculating expenses for the purchase of shares or stakes in companies forcibly redomiciled to Russia are established.

Thus, in the case of direct participation of the taxpayer in a foreign holding company owning a Russian asset, the tax cost of shares/stakes received during redomiciliation is established as follows: the amount of documented and actually incurred expenses of the taxpayer for the acquisition of shares/stakes in the authorized capital of such a foreign holding company is taken. It is then multiplied by the share of the book value of shares/stakes in the authorized capital of the Russian company owned by such a foreign holding company in the book value of the assets of the foreign holding company. The share is taken into account according to the financial statements as of the last reporting date preceding March 1, 2022. Using this approach often leads to the fact that investors who acquired shares/stakes in Russian companies listed on the stock exchange using foreign holdings cannot deduct the full amount of expenses incurred. This situation is relevant, for example, for investors in Rusagro and X5 shares.

The bill submitted to the State Duma of the Russian Federation proposes, by decision of the redomiciled company, instead of the share of the book value, to use the share of the market value of its shares/stakes in the market value of the assets of the foreign holding company as of 150 days after the court decision to suspend the rights of the foreign holding company. In this case, the assessment will be conducted at the initiative of the redomiciled company by an independent appraiser acting under Russian law. The share calculated taking into account the market assessment will be published by the redomiciled company within 30 days from the date of the assessment report. In some cases, the bill provides for the possibility of equating this share to one.

If the bill is adopted, investors in Russian companies that were listed on the stock exchange using foreign holding companies will be able to deduct all or almost all expenses incurred on their acquisition when selling such investments, and the problem of incomplete deduction of such expenses, leading to increased tax upon sale, will be resolved.

Foreign investors will receive compensation for lost assets in Russia

Euroclear will unfreeze part of Russian assets. The permission for this was issued to the depository by the treasury of Belgium. The money will be used to pay compensation to investors who suffered losses due to court decisions in Russia and the decree of the President of the Russian Federation dated March 19, 2024. 

Euroclear and the Belgian government thus offer their clients, whose assets were affected by Russian counter-sanction measures, the opportunity to receive compensation from the blocked funds under its management. It is, in a sense, an exchange of assets, albeit through unilateral measures by the National Settlement Depository and Euroclear. Euroclear will pay funds to those of its clients who would have received money if not for Russian counter-sanctions. It mainly concerns European and American banks and brokers. And they will be able to distribute these funds among their clients, mainly Western ones.

Mark Gindileev Tax Lawyer

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