Article
Russia has joined a convention against offshore profit shifting

The Government of Russia by its decree No. 963-r of 23.05.2017 On signing the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting has approved Russia’s joining the multilateral convention of the Organisation for Economic Co-operation and Development (OECD). The draft has been prepared by the Ministry of Finance of the Russian Federation and has been approved by the Ministry of Foreign Affairs, the Ministry of Economic Development, the Ministry of Justice and the Federal Tax Service.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting of 24.11.2016 was developed by the member countries of the Special Group of the OECD as a part of the Action Plan on Base Erosion and Profit Shifting (BEPS). The Convention has been opened for signature since December 31, 2016. With Russia having joined the Convention, the number of BEPS member countries has totaled 67.

The provisions of the Convention are intended to prevent offshore profit shifting and help to coordinate work on implementation of the BEPS Action Plan via multilateral approval of changes in the ways of implementation of existing agreements on avoidance of double taxation. This also eliminates the need for bilateral negotiations on each of these agreements taken separately.

This, in its turn, helps the members to provide flexibility during fulfilment of their obligations, and to create conditions for high transparency of activity both of countries themselves and of their tax authorities and taxpayers.

The application of the Convention will affect 63 agreements on double taxation avoidance between the Russian Federation and foreign countries, except countries that are not members of the Special Group of the OECD for development of the Convention. The exception also applies to Sweden and Japan due to extended negotiations on conclusion of new agreements that take into account the provisions of the Convention.

The Convention does not contradict the Treaty on the Eurasian Economic Union, and other previous international treaties of the Russian Federation.

The Organisation for Economic Co-operation and Development is an international economic organisation of developed countries that have united based on market economy and democracy. The OECD was founded in 1948 as Organisation for European Economic Co-operation (OEEC) in order to coordinate European economic recovery projects under the Marshall Plan. Organisation’s headquarters are located in Château de la Muette, Paris. José Ángel Gurría Treviño has been its Secretary-General since 2006. The Council of representatives of member countries governs the OECD, and the decisions are based on general consensus. At present, the organization includes 35 countries, with the most of the EU member countries among them. The European Commission, as an institution of the European Union, is also a separate member of the organization. The share of the OECD member countries in the gross world product amounts to 60%.

Just to remind you, according to the Federal Tax Service, treaties on avoidance of double taxation are applied by the Russian Federation with the following countries:

No. Country Date of conclusion of treaty Effective date Applied since Applied since
1. Albania 11.04.1995 09.12.1997 01.01.1998  
2. Algeria 10.03.2006 18.12.2008 01.01.2009  
3. Argentina 10.10.2001 15.10.2012 01.01.2013  
4. Armenia 28.12.1996 17.03.1998 01.01.1999  
5. Australia 07.09.2000 17.12.2003 01.01.2004 (Russia) 01.07.2004 (Australia)
6. Austria 13.04.2000 30.12.2002 01.01.2003  
7. Azerbaijan 03.07.1997 03.07.1998 01.01.1999  
8. Belgium 16.06.1995 26.01.2000 01.01.2001  
9. Botswana 08.04.2003 23.12.2009 01.01.2010 (Russia) 01.07.2010 (Botswana)
10. Bulgaria 08.06.1993 24.04.1995 01.01.1996  
11. Canada 05.10.1995 05.05.1997 01.01.1998  
12. Chile 19.11.2004 23.03.2012 01.01.2013  
13. China 27.05.1994 10.04.1997 01.01.1998  
14. Croatia 02.10.1995 19.04.1997 01.01.1998  
15. Cuba 14.12.2000 15.11.2010 01.01.2011  
16. Cyprus 05.12.2008 17.08.1999 01.01.2000  
17. Czech Republic 17.11.1995 18.07.1997 01.01.1998  
18. Denmark 08.02.1996 27.04.1997 01.01.1998  
19. Egypt 23.09.1997 06.12.2000 01.01.2001  
20. Finland 04.05.1996 14.12.2002 01.01.2003  
21. France 26.11.1996 09.02.1999 01.01.2000  
22. Germany 29.05.1996 30.12.1996 01.01.1997  
23. Greece 26.06.2000 20.12.2007 01.01.2008  
24. Hungary 01.04.1994 03.11.1997 01.01.1998  
25. Iceland 26.11.1999 21.07.2003 01.01.2004  
26. India 25.03.1997 11.04.1998 01.01.1999 (Russia) 01.04.1999 (India)
27. Indonesia 12.03.1999 17.12.2002 01.01.2003  
28. Iran 06.03.1998 05.04.2002 01.01.2003  
29. Ireland 29.04.1994 07.07.1995 01/06.04.1996 (Ireland) 01.01.1996 (Russia)
30. Israel 25.04.1994 07.12.2000 01.01.2001  
31. Italy 09.04.1996 30.11.1998 01.01.1999  
32. Japan 18.01.1986 27.11.1986 01.01.1987  
33. Kazakhstan 18.10.1996 29.07.1997 01.01.1998  
34. Kuwait 09.02.1999 03.01.2003 01.01.2004  
35. Kyrgyz Republic 13.01.1999 05.07.2000 01.01.2001  
36. Latvia 20.12.2010 06.11.2012 01.01.2013  
37. Lebanon 07.04.1997 16.06.2000 01.01.2001  
38. Lithuania 29.06.1999 05.05.2005 01.01.2006  
39. Luxembourg 28.06.1993 07.05.1997 01.01.1998  
40. Macedonia 21.10.1997 14.07.2000 01.01.2001  
41. Malaysia 31.07.1987 неизвестно 01.01.1989  
42. Mali 25.06.1996 13.09.1999 01.01.2000  
43. Malta 24.04.2013 22.05.2014 01.01.2015  
44. Mexico 07.07.2004 02.04.2008 01.01.2009  
45. Mongolia 05.04.1995 22.05.1997 01.01.1998  
46. Morocco 04.09.1997 31.08.1999 01.01.2000  
47. Namibia 30.03.1998 23.06.2000 01.01.2001  
48. Netherlands 16.12.1996 27.08.1998 01.01.1999  
49. New Zealand 05.09.2000 04.07.2003 01.01.2004 (Russia) 01.04.2004 (New Zealand)
50. North Korea 26.09.1997 30.05.2000 01.01.2001  
51. Norway 26.03.1996 20.12.2002 01.01.2003  
52. Philippines 26.04.1995 12.12.1997 01.01.1998  
53. Poland 22.05.1992 22.02.1993 01.01.1994  
54. Portugal 29.05.2000 11.12.2002 01.01.2003  
55. Qatar 20.04.1998 05.09.2000 01.01.2001  
56. Republic of Belarus 21.04.1995 21.01.1997 01.01.1998  
57. Republic of Moldova 12.04.1996 06.06.1997 01.01.1998  
58. Romania 27.09.1993 11.08.1995 01.01.1996  
59. Saudi Arabia 11.02.2007 01.02.2010 01.01.2011  
60. Serbia, Montenegro 12.10.1995 09.07.1997 01.01.1998  
61. Singapore 09.09.2002 16.01.2009 01.01.2010  
62. Slovakia 24.06.1994 01.05.1997 01.01.1998  
63. Slovenia 29.09.1995 20.04.1997 01.01.1998  
64. South Africa 27.11.1995 26.06.2000 01.09.2000 (South Africa) 01.01.2001 (Russia)
65. South Korea 19.11.1992 24.08.1995 01.01.1996  
66. Spain 16.12.1998 13.06.2000 01.01.2001  
67. Sri Lanka 02.03.1999 29.12.2002 01.01.2003 (Russia) 01.04.2003 (Sri Lanka)
68. Sweden 14.06.1993 03.08.1995 01.01.1996  
69. Switzerland 15.11.1995 18.04.1997 01.01.1998  
70. Syria 17.09.2000 31.07.2003 01.01.2004  
71. Tajikistan 31.03.1997 26.04.2003 01.01.2004  
72. Thailand 23.09.1999 15.01.2009 01.01.2010  
73. Turkey 15.12.1997 31.12.1999 01.01.2000  
74. Turkmenistan 14.01.1998 10.02.1999 01.01.2000  
75. Ukraine 08.02.1995 03.08.1999 01.01.2000  
76. United Kingdom 15.02.1994 18.04.1997 01.01.1998 (Russia) 01./06.04.1998 (United Kingdom)
77. USA 17.06.1992 16.12.1993 01.01.1994  
78. Uzbekistan 02.03.1994 27.07.1995 01.01.1996  
79. Venezuela 22.12.2003 19.01.2009 01.01.2010  
80. Vietnam 27.05.1993 21.03.1996 01.01.1997  
Ranking
Return on equity of the largest Russian credit institutions

Information agency Credinform offers the ranking of the largest Russian credit institutions. The largest Russian credit institutions with the largest size of equity were selected for the ranking, according to the data of the Central Bank of Russia (CBR) for the reporting period of 2016 (TOP-10). Then they were ranked by the return on equity ratio in 2016 (Table 1).

Return on equity, as one of performance ratios, characterizes the return on bank's capital and is calculated as the relation of net profit to equity of a credit institution. The ratio shows the return on investment of shareholders in terms of accounting profit.

For getting of the most comprehensive and fair picture of the financial standing of an enterprise it is necessary to pay attention to all combination of its financial indicators and ratios.

Table 1. Share capital, net profit, return on equity, bank’s financial stability index Globas® of the largest Russian banks (TOP-10)
Name, BIC, PSRN, region, date of establishment Share capital, mln RUB Net profit, 2015, mln RUB Net profit, 2016, mln RUB Return on equity, 2015, % Return on equity, 2016, % Bank’s financial stability index Globas®
PAO INTERREGIONAL BANK FOR SETTLEMENTS OF THE TELECOMMUNICATIONS AND POSTAL SERVICES Moscow BIC 044525848 PSRN 1027700159288 19.05.1991 36 864,6 10 283,3 14 073,3 21,06 37,98 175 The highest
NAO RAIFFEISENBANK Moscow BIC 044525700 PSRN 1027739326449 09.06.1996 36 711,3 20 139,1 23 933,1 16,13 17,53 216 High
PAO SBERBANK OF RUSSIA Moscow BIC 044525225 PSRN 1027700132195 19.06.1991 67 760,8 236 256,1 516 987,8 8,82 16,45 202 High
NAO GAZPROMBANK Moscow BIC 044525823 PSRN 1027700167110 22.01.1992 190 234,3 34 365,3 109 685,1 5,32 15,90 226 High
PAO BANK VTB 24 Moscow BIC 044525716 PSRN 1027739207462 17.11.1991 113 382,9 461,2 43 126,1 0,17 14,58 236 High
NAO UniCredit Bank Moscow BIC 044525545 PSRN 1027739082106 14.11.1991 40 438,3 6 003,8 16 655,1 3,45 9,29 222 High
PAO VTB BANK Moscow BIC 044525187 PSRN 1027739609391 16.10.1990 651 033,9 48 580,7 70 006,6 4,79 6,88 210 High
NAO ALFA-BANK Moscow BIC 044525593 PSRN 1027700067328 02.01.1991 59 587,6 49 591,4 5 117,6 13,79 1,43 193 The highest
PAO COMMERCIAL BANK AK BARS Republic of Tatarstan BIC 049205805 PSRN 1021600000124 28.11.1993 38 015,4 9 801,6 645,7 16,74 0,90 171 The highest
NAO Russian Agricultural Bank Moscow BIC 044525111 PSRN 1027700342890 23.04.2000 339 848,0 69 207,2 909,2 16,80 0,23 180 The highest
Total in the group of TOP-10 banks 1 573 877,0 484 689,7 801 139,6      
Average value in the group of TOP-10 banks   48 469,0 801 139,6 10,71 12,12  
Industry average value   1 644,1 2 250,7 12,37 13,05  

The average values of the return on equity ratio in 2015 - 2016 in the group of TOP-10 banks are below the industry average values (in Table 1 and Picture 1 the green and yellow fillings mark the indicators, which are higher and lower than the industry average values, respectively).

Three banks from the TOP-10 reduced net profit in 2016 in comparison with the previous period (are marked with a red filling in Table 1).

Picture 1. The return on equity and the share capital of the largest Russian banks (TOP-10) Picture 1. The return on equity and the share capital of the largest Russian banks (TOP-10)

The industry average values of the bank's financial stability index (Picture 2) reflect generally the macroeconomic trends. Thus, there is a decrease in ratio values observed in the periods of crisis in the economy in 2007-2009 and in 2013-2014.

Picture 2. Industry average values of the return on equity of the largest Russian banks in 2006 – 2016 Picture 2. Industry average values of the return on equity of the largest Russian banks in 2006 – 2016

All TOP-10 banks got the highest and high bank's financial stability index Globas®, that points to their ability to repay their debts in time and fully.