A view of Aphrodite Hills, Cyprus
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Finance Ministry Gave By-Name List of Offshores
Russia’s Finance Ministry promulgated yesterday a list of offshore firms and territories, the registration in which won’t enable the companies to transfer tax-free dividend to Russia. Another black list is of no principal significance, the analysts say. Close to the government big companies that will actually enjoy this benefit don’t refer to services of dubious tax jurisdictions.
The emergence of Finance Ministry’s list of 41 offshores could be attributed to amendments to the Tax Code that take effect January 1, 2008. The amendments set a zero tax rate for the dividend profit generated by companies from interest in the capital of other organizations (i.e. their subsidiaries). So far, the respective tax rate has been 9 percent and even 15 percent, should a foreign company pay the dividend.
This exemption from taxation was initiated by President Vladimir Putin, who committed the bureaucrats to create incentives for stationing holdings in Russia.
When executing this order of president, the government and the State Duma conditioned tax benefit to a number of terms. To be exempt from the tax, a holding is to have a stake in the authorized capital of the company paying the dividend of at least 500 million rubles (over $20 million). Moreover, this company shouldn’t be incorporated in any of offshore territories, which list Finance Ministry promulgated on Friday. The list was compiled based on two criteria – the country’s refusal to provide data on financial transactions and the profit tax that is one-third less than in Russia (24 percent).
Of interest is that the list of Finance Ministry doesn’t mention such clear offshore territories as the Seychelles and Barbados. Anyway, this omission is of no practical significance. Setting the minimal amount at 500 million rubles narrows the list of benefiting firms to the biggest companies that are usually affiliated with the government. But these giants will hardly refer to the little-known offshore territories to avoid taxes. In the nearest future, the analysts speculate, big money will mostly go via Luxemburg, Holland, Austria and Britain that aren’t specified in the list.
www.kommersant.com
All the Article in Russian as of Dec. 10, 2007
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