Notification from the Russian tax authorities about foreign accounts

The growth of foreign bank accounts among Russians

In recent years, the number of wealthy Russians who voluntarily declare their foreign bank accounts to Russian tax authorities has significantly increased. This is according to the results of a survey conducted in 2017 among private banking specialists, lawyers, and tax consultants.

Tightening of legislation and international agreements

Every year it becomes more and more difficult for Russian tax and currency residents to hide their financial assets abroad. tax and currency residents. This is due to the introduction of amendments to currency regulation legislation and Russia's accession to the Agreement on Automatic Exchange of Financial Information (CRS). regulation and Russia's accession to the Agreement on Automatic Exchange of Financial Information (CRS MCAA).

The impact of the Agreement on Automatic Exchange of Financial Information

According to the survey results, after the implementation of the CRS, about 40% of Russians with foreign accounts began notifying the Russian tax authorities about this, whereas previously this percentage was around 10%. Many of those who decided to declare their foreign accounts are opening new accounts with a clean transaction history and closing old ones to avoid any connection between them.

Strategies of those who avoid declaration

Some Russians prefer not to declare their foreign accounts. In 2016, nearly half of the respondents indicated that such individuals often change their tax residency, and by 2017, this option was chosen by 78% of survey participants. Some become residents of other countries or use foreign programs to obtain residency or citizenship. Cyprus and the United Kingdom have become popular countries for changing tax residency.

Attractiveness of Cyprus investment program

Georgy Kachmazov notes that the interest in the Cypriot investment program is due to its simplicity and attractive conditions for investors.

Obtaining citizenship in Cyprus is now available for just two million euros and in only three months. This method is particularly attractive for those considering relocating to the UK, especially compared to the British investment residency program, which takes much longer and was significantly more expensive until recently. The process of obtaining investment residency in Cyprus is faster than in the UK. Given that Britain is no longer a desirable destination for oligarchs and their capital, many are seeking alternative ways to achieve their goals.

Alternative jurisdictions

In addition to Cyprus, Russians are exploring other countries for the possibility of obtaining citizenship or residency, such as Andorra, Greece, Spain, Luxembourg, the UAE, the USA, and the Baltic states. Many of them transfer their assets to the names of nominal holders to maintain the confidentiality of their financial data. Relatives, friends, and close individuals often act as 'nominees', according to most survey participants. Trust structures are also popular among Russians.

Opinion of the survey participants

Many survey participants claim that the situation with controlled foreign companies (CFCs) in Russia remains quite complicated. Last year, only half of the CFC owners reported this to the Russian tax authorities.

Measures to circumvent legislation

However, those who do not intend to notify take various measures to circumvent the legislation. For example, one such mechanism is reducing the shareholding to less than 25%, while control is maintained by the actual owner through internal agreements.

Benefits of doing business in Russia

As Georgy Kachmazov notes, more and more entrepreneurs believe that doing business in Russia is more profitable than simulating activities abroad due to lower taxes and administrative costs.

Advantages of using an offshore company

For large companies with foreign assets, the use of CFCs remains important for tax planning and protection from Russian jurisdiction risks. For large companies with foreign assets, the use of CFCs remains important for tax planning and protection against risks associated with Russian jurisdiction.

Secrecy of foreign assets

Although disclosing foreign assets is becoming increasingly difficult, most wealthy Russians still avoid revealing information about their overseas accounts and companies. This is driven not only by a desire to reduce tax pressure but also by concerns about the security of personal information.

In summaryIt can be said that every year more and more wealthy Russians decide to notify the tax authorities about their foreign accounts. Russians are deciding to notify the tax authorities of their foreign accounts. Recent changes Recent changes in legislation and accession to international agreements make hiding capital abroad more and more difficult, and the choice of country for investment and transfer of capital is becoming more and more deliberate. The recent changes in legislation and accession to international treaties make hiding capital abroad more and more difficult, and the choice of country for investing and transferring capital is becoming more and more thoughtful.

Although some account holders choose to transfer capital to the names of nominal owners or close their accounts, most still comply with the law and inform tax authorities. This indicates that the financial sector is under constant scrutiny and control, and the need to adhere to laws is becoming increasingly important for all citizens.