Ban for allocation of budgetary funds to offshore companies

According to the Federal law №23-FZ «On Amendments to the Budget Code of the Russian Federation» it is not allowed to provide subsidies and budget investment to foreign legal entities with the place of registration in offshore areas. It is legislated that offshore area is a state or territory, granting privileged tax regimes and do not requiring the disclosure of information in the source of financial transactions. The List of such countries and territories is approved by the Order of the Ministry of Finance of the RF №108n dated 13.11.2007.

The ban on the provision of subsidies and budget investment is related in particular to contribution to producers of goods, works and services for lost income, as well as costs connected with the production. These restrictions are also related to Russian legal entities, the share of offshore companies in the authorized capital of which is more than 50%.

In addition, since 2017 offshore companies won’t be able to receive state and municipal guarantees or act as a principal or beneficiary on guarantees. In case of violation of this rule, financial funds paid under guarantees must be returned to the budget by their recipient. The exceptions are only state guarantees of the RF, relating to the provision of support for industrial exports.

The provisions mentioned above apply to legal relations, which arose by drawing up and meeting budgets of the RF, beginning with 2017, i.e. as of 2017 and the planning periods 2018-2019.

At the present time the above mentioned List of states and territories, being offshore areas, includes 40 items. The dividends of enterprises registered in the states, which are included in this List, are applied by the tax rate of 9%. In the near future China's Special Administrative Region Hong Kong will be excluded from the List of offshore areas due to the ratification of the intergovernmental agreement between Russia and Hong Kong.

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