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State Duma Lures Holdings to Russia
Russia’s State Duma passed in the second reading a bill relieving holdings from taxes accrued on the dividend profits. In an effort to execute president’s order and lure profit-generating centers of Russia’s companies from oversees, State Duma and Finance Ministry conditioned the benefits to so many restrictions that actually striped the project of all attractiveness.
The bill passed by the State Duma on Friday sets a zero profit tax for dividend generated by companies from having a share in capital of other organizations, i.e. in capital of their subsidiaries.
Today’s rate is 9 percent, but the amount climbs to 15 percent if the foreign company pays dividend. So, great numbers of Russia’s companies prefer to register a head office in the countries where no tax is imposed on dividend.
Theoretically, up to 700 Russia’s companies will be able to use a zero tax, calculated State Duma’s lawmaker Natalia Burykina.
But the business will hardly rush back to the country at large to take advantage of zero taxation. On fear of tax minimization, perhaps, the lawmakers and financial bureaucrats added so many restrictions to the bill that it lost all efficiency.
The bill has four limiting requirements overall. To be relieved from the tax on dividend profits, a holding will have to own at least 50 percent in stock capital of the company that pays dividend, the term of this continuous ownership won’t be less than a year, the share will cost at least 500 million rubles (roughly $20 million) and a company paying the dividend shouldn’t be incorporated in the offshore area. Of these four restrictions, the first three couldn’t be avoided, the analysts speculate doubting attractiveness of softer regulations.
www.kommersant.com
All the Article in Russian as of Apr. 23, 2007
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