Three key developments in Russia that taxpayers should be aware of are the increasingly litigious market, the impact of the de-offshorisation campaign in the jurisdiction and the introduction of country-by-country reporting (CbCR).
These three developments will likely combine to make the tax environment quite testing in the months and years to come for taxpayers and tax professionals, not least because they combine to give the Russian State greater knowledge of Russian taxpayers' financial affairs than ever before. They also give more power to influence those affairs through the sanctions at the tax authorities' disposal through the de-offshorisation legislation, sanctions they will not hesitate to use, judging from their willingness to litigate.
These general trends should give taxpayers pause for thought, as the Russian courts have a reputation for rarely going against the state. Advisers must develop and use solid dispute resolution methods if their clients are found lacking by the authorities, to prevent the issue from reaching the court.
The Russian government has set out to encourage Russian controlled foreign companies (CFCs) to incorporate, or re-incorporate, under Russian law. This is known as the de-offshorisation campaign and, starting January 2017, for a Russian citizen to deliberately conceal, or not declare an asset held abroad, or offshore, will be an offence. For the purposes of the law a CFC is any company in which a Russian taxable person or entity has a controlling stake.
Reforms were introduced to the tax code in 2014 to the effect that the Russian state could essentially force any Russian citizen's business activities not conducted, or incorporated, in Russia back into Russia by law if said Russian citizen held a controlling stake in said asset of 25% or more. For individuals, as opposed to companies, a two-year grace period would apply, whereby the level of control deemed acceptable is 50% or less. This deadline passed at the end of June 2016.
This is not to say that there haven't been any positive impacts of the de-offshorisation programme. "In its current form it seems to be beneficial, people are taking the opportunity to fix their tax affairs," said an adviser Evgeny Timofeev, partner at Goltsblat BLP.
"To normalise them, it seems like a positive step from the point of view of taxpayers and the tax authorities, as well as from the point of view of tax advisers," he added. "Frankly it's quite rare for large law firms to work on private client work. But with de-offshorisation, there is a potential to change your tax residency, so there is a potential to pick up new clients here."
Although Russia is not a member of the OECD, advisers believe that the authorities are monitoring the BEPS Project closely, and that any further reforms that arise will be heavily informed by BEPS.
Ernst & Young
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|Corporate profits tax||0%||15.5%||20%||A B|
|Capital Gains Tax||0%||15.5%||20%||A C|
|Net Operating Losses (years)|
|Other interest rates||20%||E|
|Interest on certain types of state and municipal securities||15%||E|
|Royalties from, for example, patents, know-how||20%||E|
|Income from the operation, maintenance or rental of vessels or airplanes in international traffic||10%||E|
|Payments of other Russian-source income of foreign companies||20%||E|
|Branch Remittance Tax||0%|
At ALTHAUS Consulting a key contact is Sergey Gerasimov, who leads the tax professionals at the firm to give a wide range of tax consultancy services to clients in the information technology, transport and aerospace, TMT, and energy and utilities industries.
ALTHAUS is a Moscow-based independent consulting firm which specialises in the support of foreign investments into Russia as well as M&A deals. The firm has professionals with long experience of assisting clients with tax issues, many of whom gained this from working with the Big 4 accountancy firms, multinationals as well as tax authorities.
The firm's main areas of expertise include corporate finance and transaction support services, tax and legal advisory, valuation and financial modelling and transfer pricing as well as the provision of accounting, tax compliance and payroll outsourcing services.
The tax and legal department at AO Mazars is led by Maria Semenova, who joined the firm in March 2016 and specialises in transactional tax matters, and comprises a further eight fee earners.
Mazars has been operating in Russia for more than 10 years and offers a wide range of tax services, working in conjunction with the audit, accounting and finance departments to approach between 80 and 100 tax projects each year from multiple angles.
Some of the firm’s key industries are food and fast-moving consumer goods, manufacturing, healthcare and pharmaceuticals, TMT, and financial services, although the firm also offers services in a wide range of other industries.
In one deal, tax director Ludmila Dyakonova worked with a major Russian bank on the due diligence aspects of the acquisition of a Russian steel construction plant. The team applied an innovative approach to tax risk assessment relating to inter-company financing transactions.
A key contact at Baker & McKenzie is Alex Chmelev who leads a team of 22 professionals in the Moscow and St. Petersburg offices, six of whom work in indirect tax, 11 of whom work in indirect tax and VAT, four of whom cover tax disputes and three of whom cover compliance and accounting.
The firm provides comprehensive advice on Russian and international tax planning and structuring, M&A support, tax controversy, VAT, the taxation of employee benefits and share incentives, private wealth management and transfer pricing. Its clients come from a wide range of industries notably energy and utilities, healthcare and pharmaceuticals, financial services, information technology, technology, media and telecommunications (TMT) and manufacturing.
BDO Unicon in Russia is led by Sergey Chelyshkov, who leads a team of 31 tax professionals of whom four cover indirect tax, 20 cover corporate tax, five who assist clients with tax disputes and litigation, and two of whom cover compliance and accounting.
This year saw the firm advise a number of market leading domestic and international companies on a wide range of innovative and complex tax deals, the firm positions itself in the Russian market as a go-to firm for companies looking for effective tax structuring advice.
The team primarily advises firms in the TMT, information technology, FMCG, manufacturing, healthcare and pharmaceuticals and transport industries. The firm holds expertise with domestic and international tax structuring, advising on the benefits arising from double tax treaties, as well as advising clients on the implications of domestic and international developments in tax law including the BEPS project and the Russian de-offshorisation initiative.
Clifford Chance advises clients on a range of tax issues, notably those relating to banking and finance tax, capital markets, corporate M&A and joint ventures and its tax implications, the tax aspects of private equity and funds, restructuring, real estate and VAT.
CMS Russia is led by Dominique Tissot, who oversees a team which deals with complex tax issues relating to M&A, investment funds, tax planning, double tax treaties, transfer pricing, and establishment of holding structures, customs and excise duty, VAT, and tax disputes.
The firm represents clients including foreign and domestic, privately and publicly held companies and multinational groups.
Deloitte in Russia is led by Grigory Pavlotsky. The tax team advises clients from a range of industries with a primary focus on energy and utilities, TMT, manufacturing, FMCG and financial services.
The services it offers include advising on domestic and international corporate tax structuring, transfer pricing and documentation requirements, the tax implications of M&A and leveraged buyout transactions as well as dispute resolution and litigation services.
The firm was particularly proud of the trust that its clients place in it, believing that this is shared by government representatives and policymakers, as indicated by Deloitte Russia's role as the primary adviser to the Russian Ministry of Finance in the drafting of the Russian de-offshorisation legislative package.
Dentons head of tax in Russia is Dzhangar Dzhalchinov, who leads a team of 10, nine of whom cover indirect tax and VAT, six who advise clients on corporate tax issues, eight who advise clients on tax disputes and litigation and five who offer compliance and accounting services. These clients include domestic and international privately and publicly held companies, individuals and multinational groups, as well as government departments and state-owned enterprises.
DLA Piper has offices in Moscow and St. Petersburg. The firm advises clients on a range of domestic and international tax issues, including tax due diligence, controversy and litigation, tax structuring both domestically and internationally and transfer pricing.
Key industries for the firm include banking and financial services, energy, hospitality and leisure, insurance, life sciences, manufacturing, media, sports and entertainment, mining and technology.
Igor Schikow is the head of tax at Egorov Puginsky Afanasiev & Partners. Schikow, and a tax professional with a number of years of experience advising high calibre clients, on complex tax projects, and is fluent in Russian, German and English.
He leads a team of eight tax professionals, who advise Russian and international clients from a range of industries, including, manufacturing, healthcare and pharmaceuticals, energy and utilities, financial services, FMCG and information technology. This year has seen the firm expand its private client base as a result of its tax consultancy work in the area of the de-offshorisation campaign.
The firm is particularly favoured by German companies when operating in Russia, but has this year added two new professionals who can focus on the Russian market and grow the firm domestically.
EY's head of tax in Russia is Peter Reinhardt, who leads a team of 392 tax professionals. The firm assists clients primarily in the financial services, TMT, healthcare and pharmaceuticals, manufacturing and energy and utilities sectors, among other areas. The firm's clients include domestic and international, private and public companies and multinational groups. It can advise clients on the full range of tax issues, with 19 professionals covering indirect tax, 312 who cover corporate tax, seven who cover tax disputes and litigation, and 54 who work in tax compliance and accounting.
This year the firm advised a large multinational engaged in the mining industry in a restructuring that it was undertaking in light of the Russian de-offshorisation initiative and the OECD's BEPS Project. A new management structure was developed, which helped to ensure that the tax profile of the company was the most beneficial it could be given the development in domestic and international tax.
Key contacts at FBK Legal are Galina Akchurina and Tatiana Matveicheva. Akchurina is head of the tax resolution department and a tax litigation specialist while Matveicheva, is head of the tax consulting department. Together they oversee the tax department which includes 34 tax professionals, 19 of whom cover indirect tax and general corporate tax issues and 17 of whom advise on tax litigation and disputes.
FinExpertiza in Russia's accounting, tax and legal department is led by Yulia Eshkina. The department comprises a team of three partners and 16 other tax professionals. Of whom, six cover indirect tax and VAT, seven cover corporate tax, three cover tax disputes and litigation and four cover tax compliance and accounting.
The firm primarily deals with firms in the energy and utilities, transport and aerospace, manufacturing, financial services, healthcare and pharmaceuticals, TMT industries. Key service areas for the firm include commercial tax, tax litigation and tax disputes, transfer pricing, corporate M&A, domestic and international tax structuring and consultancy work relating to the OECD's BEPS and the Russian de-offshorisation campaign and its implications for domestic and international companies and multinationals operating in Russia.
The tax team at Goltsblat BLP in Russia is headed by Evgeny Timofeev, the leader of the firm's fiscal department. He oversees a team which includes one other partner and 15 other tax professionals, of whom eight cover indirect tax, seven cover corporate tax, seven who cover tax disputes, and six who cover tax compliance and accounting.
Industries the firm primarily advises in include FMCG, manufacturing, financial services, TMT, information technology and healthcare and pharmaceuticals. Its primary areas of expertise include tax litigation and dispute resolution, international and domestic tax structuring, as well as other key areas of tax consultancy advice.
Herbert Smith Freehills' tax professionals specialise in offering assistance to clients operating in the insurance, employment, remuneration, pensions and incentives, energy, infrastructure and TMT industries, among others.
A key contact at the firm is Oleg Konnov, who leads a team which offers a range of tax issues including, but not limited to, the tax implications of M&A, corporate restructuring, demergers, capital markets and financing.
KPMG in Russia is led by Mikhail Orlov, who leads one of the largest tax teams in the jurisdiction, totalling 444 tax professionals of whom 14 cover indirect tax, 81 cover corporate tax, 18 cover tax disputes and litigation, and 97 cover tax compliance and accounting. The team primarily advises clients in the energy and utilities, food, fast moving consumer goods (FMCG), financial services, manufacturing, healthcare and pharmaceuticals and TMT industries.
KPMG has been present in the Russian market for 25 years, and the Russian office works closely with the firm's other offices across Europe and the world offering its clients a truly integrated international tax service.
Linklaters' tax team assists clients from the chemicals, banking, automotive, consumer services, healthcare, industrials, infrastructure and transport and insurance industries. It advises on a range of tax and transfer pricing issues, particularly related to the tax implications of M&A, capital raising, structuring, contentious tax, structuring and the management of trusts, as well as giving tax advice on the implications of the Russian de-offshorisation initiative and tax structuring post-BEPS.
Pepeliaev Group, Taxand Russia has a team of 60 tax professionals comprising 10 partners and 50 other fee earners. The team is particularly noted for its expertise in areas including documentation drafting, tax litigation, tax-efficient corporate structuring and negotiation with the tax authorities.
A key contact at the firm is managing partner Sergey Pepeliaev, the team primarily advises firms in the energy and utilities, FMCG, financial services, transport, manufacturing, and TMT sectors. Its clients include domestic and international private and public held companies and multinational groups, as well as several state owned enterprises from Russia and beyond.
PwC in Russia is led by Ekaterina Lazorina. PwC Russia is particularly strong in advising clients with tax-related issues relating to the oil and gas, financial, retail, pharmaceuticals, TMT and entertainment industries.
Through the PwC brand worldwide, the firm can offer its clients a truly international service that takes account of the international dimension of tax in the post-BEPS age.
Sameta's head of tax is Lyudmila Batalova. Professionals at the firm advise clients on a comprehensive range of tax issues including VAT reimbursements, tax planning and tax structuring of transactions, with a focus on real estate, and many other key tax services but with a particular focus on corporate tax advisory, corporate tax, M&A, dispute resolution, litigation and restructuring.
Shapovalov Petrov's clients are primarily drawn from the energy, oil, gas and solid mineral extraction, air carriage, transportation and real estate industries. Kirill Petrov leads the team, which specialises in advising clients in tax structuring, project tax management and investment funding, tax litigation, risk assessment and transfer pricing.
Taxperience in Russia advises clients who include domestic and international, privately and publicly held companies, individuals and multinational groups on a range of tax issues, notably personal and corporate tax, compliance, tax audits, business structuring and litigation.
White & Case's tax team is headed by Irina Dmitrieva, a well-recognised tax professional with many years' experience in advising on local and international taxation. Dmitrieva had a key role in the development of the Russian tax code since its inception in 1991.
Along with her team, she gives tax advice relating to M&A, private equity, corporate restructuring and real estate, to a range of clients from different industries, with a particular focus in the energy, financial institutions, TMT, real estate, and construction and transport industries.
|Tier 1 - Russia|
|Baker & McKenzie|
|Pepeliaev Group, Taxand Russia|
|Tier 2 - Russia|
|Egorov Puginsky Afanasiev & Partners|
|Tier 3 - Russia|
|Herbert Smith Freehills|
|White & Case|
|Tier 4 - Russia|