Ministry of Finance has begun to fight with offshore tax evasion schemes

The Ministry of Finance of the RF has drawn up instructions for the Federal Tax Service (FTS), where it has prescribed the most wide-spread tax avoidance maneuvers using offshore companies, liable for obligatory suppression.

By that in the law enforcement practice of double taxation legislation it is important to make a clear distinction between a beneficial owner, who/which reasonably pretends to his/her/its income, and nominally created «fly-by-night companies», transit companies, which allow unreasonably to remove income from the country of capital origin.

Among existing schemes the transfers of dividends, borrowing charges and intellectual property rights to offshores through intermediaries will be under close monitoring. For similar operations a transit company is created, which is thought to be the owner in the dealing with Russian resident and offshore structure. Such broker companies help remove passive income through the country, which has the double tax agreement with Russia, to offshore with minimal tax losses. Now it is planning to oblige all companies, registered in Russia, to get written opinion about potential partner in offshore countries. And if a company from the black list of the Ministry of Finance will be found out among shareholders of a contractor, it will be impossible to use tax concessions.

The situation is complicated by the fact that official authorities (FTS) have not suppressed similar schemes up to the present moment, because they have not had an opportunity to request information out of their jurisdiction, that’s why this duty was imposed on tax agent-country's resident.

Information agency Credinform has developed a list of criteria, combined into Reliability index, which let check out, if it is a fly-by-night company. This index, together with a comprehensive assessment of solvency, liquidity and assigned scoring point, helps our clients in secure choice of their contractor.