Services for controlled foreign companies (CFC)

CFC risk optimization

  • We study the business structure to determine which companies may be CFC;
  • We help preparing notices of participation in foreign organizations and CFC reports;
  • We conduct an analysis to determine whether CFC can be exempted from tax in Russia;
  • We explain what documentation needs to be prepared for CFC;
  • We audit CFCs in Russia according to international standards;
  • We determine the profit tax payable for CFC.
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CFC requirements in Russia

Tax residents of the Russian Federation must report their participation in foreign companies, and under certain conditions, pay CFC profit tax in Russia.

When a tax resident of the Russian Federation is exempt from CFC profit tax

Profit tax exemption arises in the following 3 cases:

  • CFC profit does not exceed a certain threshold;
  • CFC are exempted from profit tax due to the nature of their activity;
  • CFC are exempted from profit tax depending on their tax burden in the country of registration.
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CFC taxation options

If CFC are subject to taxation in Russia, then profit will be calculated as follows:

  • According to general rules as set out in Chapter 25 of the Russian Tax Code (based on tax registers);
  • Profit before tax as specified in financial statements.
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Conditions to use financial statements for determining the tax base

Financial statements may be used to determine the tax base provided a number of conditions set out in the Russian Tax Code are met, namely:

  • A double taxation treaty has been signed between the Russian Federation and the country in which CFC is registered;
  • Tax information is exchanged between the Russian Federation and the country in which CFC is registered;
  • The financial statements of CFC have been audited in accordance with international standards.

The calculation of CFC profits must be documented in accordance with the requirements of the Russian Tax Code, and CFC profits are included in the tax return of the controlling entity which is a Russian tax resident.

Read more about Recognition and taxation of controlled foreign companies

Deadlines

  • March 20 – deadline for submission of CFC reports (for tax periods before 2020);
  • April 30 – deadline for submission of CFC reports (for tax periods starting from 2020);
  • March 28 – deadline for submission of profit tax return including CFC profits.

Fines and penalties

  • RUB 500,000 per CFC – for failure to submit CFC reports;
  • RUB 50,000 per CFC – for failure to submit notices of participation in foreign organizations;
  • 20% of unpaid tax amount – for non-payment or partial payment of CFC profit tax.

Leading positions

Konsu is one of the leading consulting companies in Russia. We have been included in the following ratings of the rating agency Expert RA:

  • Top-10 in accounting outsourcing
  • Top-10 in payroll outsourcing
  • Top-15 in financial consulting
  • Top-15 in legal consulting
Ratings and associations

Our services

Our specialists have extensive experience in tax consulting on CFC issues, calculating the tax base, and preparing documentation in accordance with Russian tax law. Feel free to contact us for advice.