Russia taxes its tax residents on worldwide income, not only on what they earn inside the country. When that income piles up inside a foreign company rather than reaching the resident's own pocket, the controlled foreign company (CFC) rules are what let the state still reach it.
A resident who controls a foreign entity therefore has to tell the tax authority about it and, every year, hand over the entity's accounts. Russia assembled this reporting machinery in 2015 as the centrepiece of its deoffshorization campaign.
None of this is uniquely Russian. What follows: where CFC rules came from, who counts as a controlling person, which notifications fall due and when, and the separate question of when foreign profit actually becomes taxable at home.
Where the rules came from
The United States wrote the first CFC regime, Subpart F, in 1962 — a response to American groups parking profit in low-tax intermediaries and deferring US tax on it indefinitely. The fix was to tax the domestic owner now on the foreign entity's undistributed, mostly passive income, whether or not a dividend is ever paid. The design held up well enough that Washington bolted its GILTI regime onto the same base in 2018.
The model went global after the OECD's 2015 BEPS Action 3 report and the EU's Anti-Tax Avoidance Directive (ATAD), which has obliged every member state to run CFC rules since 1 January 2019. Russia's 2015 law sits squarely in this family, which is why its mechanics rhyme with the EU ATAD CFC regime even where the numbers differ.
Basic concepts
- CFC — a foreign company, or a structure without legal personality such as a trust, foundation or partnership, that is not a Russian tax resident yet is controlled by Russian tax residents. A Hong Kong company run from Moscow is the textbook case.
- Controlling person — the resident who files the notifications and pays any tax. You control a CFC if your stake exceeds 25%, or exceeds 10% while Russian residents together hold more than 50% (for individuals, shares are counted jointly with a spouse and minor children). Factual control — the real ability to steer how profit is distributed — counts too, even without a formal shareholding.
Participation notification
The first duty is the notification of participation in a foreign organization. It falls due whenever your stake passes 10%, or whenever you create a structure without legal personality. How the participation arose — registration, purchase, inheritance — does not matter; the deadline is three months from the event.
The same form covers what comes later: a fresh notification goes in when the size or form of your participation changes, and again when you exit through sale, gift or liquidation. The change in your stake is measured to two decimal places, with the second rounded conventionally (para 3 of Art. 25.14), so movements below that do not trigger a filing.
One trap catches new arrivals. Someone who becomes a Russian tax resident only by the end of a calendar year still owes the participation notification for that year, with the deadline shifted to 1 March of the year after.
Annual notification
The second duty is the annual CFC notification. From the year participation begins until the year you exit, it is filed every single year — organizations by 20 March, individuals by 30 April of the year after the CFC's profit or loss is recognized. It is owed even when the profit is exempt, even when the CFC runs a loss, and even after a switch to the fixed-profit regime. Individuals attach the CFC's financial statements and, where one exists, the auditor's report. It is a separate obligation from currency-residency foreign-account reporting, which has its own forms and deadlines.
When the profit is actually taxed
Filing and paying are separate questions. A CFC's profit only enters your Russian tax base once it tops 10 million rubles for the year — a floor unchanged since 2017. Below that you still file, but nothing is taxed.
Several exemptions lift the profit out of tax entirely, even above the floor. The broadest is the active-company exemption: if no more than 20% of the CFC's income is passive — dividends, interest, royalties, rent, gains on shares — the profit is not taxed in Russia. That active-versus-passive line is the same one that runs through economic substance tests worldwide. Companies resident in an EAEU state, qualifying active holdings and sub-holdings, banks and insurers, and entities whose effective rate is at least 75% of the Russian weighted-average corporate rate (subpara 3 of para 1, Art. 25.13-1, where a treaty and information exchange exist) are exempt as well. Each exemption has to be documented, not merely asserted.
When profit is taxable, it is attributed to the controlling person and taxed at their own rate — corporate profit tax, lifted to 25% from 2025 (it was 20%), or personal income tax on the new progressive scale running from 13% to 22%. Tax already paid abroad on the same profit is credited, and that relief deliberately survived the 2023 treaty suspension.
Computing CFC profit: a worked example
The mechanics are easiest to see on a running example: a Hong Kong trading company wholly owned by a Russian tax resident. CFC profit starts from the audited financial statements drawn up under the company's personal law — the auditor's report must carry no adverse opinion (para 1 and 1.1 of Art. 309.1 of the Russian Tax Code); absent such statements, or by election, profit is recomputed under the general Chapter 25 rules. 'Paper' items are then stripped out (para 3 of Art. 309.1) — above all fair-value revaluation and impairment of securities and participation interests, plus the equity-method share of subsidiaries' profit.
| Calculation step | Amount |
|---|---|
| Profit per audited IFRS statements for financial year 2024 (para 1, Art. 309.1) | $500,000 |
| – fair-value revaluation of securities (para 3, Art. 309.1) | – $80,000 |
| – equity-method share of a subsidiary's profit (para 3, Art. 309.1) | – $20,000 |
| = adjusted profit | $400,000 |
| Converted at the Central Bank's average exchange rate for the financial year, assume 90 rubles per dollar (para 2, Art. 309.1); the 10-million-ruble floor is cleared (para 7, Art. 25.15) | 36,000,000 rubles |
| – dividends distributed in 2025 — $100,000 (para 1, Art. 25.15) | – 9,000,000 rubles |
| = CFC profit included in the tax base | 27,000,000 rubles |
| Personal income tax on the 13–22% scale: 2.4m × 13% + 2.6m × 15% + 15m × 18% + 7m × 20% | 4,802,000 rubles |
| – credit for Hong Kong profits tax paid — $40,000 (para 11, Art. 309.1) | – 3,600,000 rubles |
| = tax payable | 1,202,000 rubles |
Profit for financial year 2024 is recognized as the controlling person's income on 31 December 2025 and is declared in the return for 2025. The 10-million floor is tested against the profit computed under Art. 309.1 — before the dividend reduction, 36 million rubles in this example (para 7 of Art. 25.15, as the Finance Ministry reads it); dividends come off at the next step, when the tax base is determined. Had the Art. 309.1 profit fallen below the floor, no tax would arise at all, though the annual CFC notification is still owed. The foreign-tax credit requires documentary proof, and with a partial stake both the attributed profit and the credit scale to the ownership share (para 3 of Art. 25.15; para 11 of Art. 309.1). No personal tax deductions apply against CFC profit.
CFC losses
A CFC's loss is not lost: it carries forward without time limit against the same company's future profit (para 7 of Art. 309.1), and the loss accumulated over the three years before 2015 can be used as well (para 8 of Art. 309.1). Two limits are rigid. A loss cannot be carried forward at all if no CFC notification was filed for the year it arose (para 7.1 of Art. 309.1) — silence costs the tax asset, not just the fine. And results never cross between companies: profit and loss are computed separately for each CFC, so one company's loss offsets neither another CFC's profit nor the controlling person's other income.
The fixed-profit option
An individual who would rather not compute and document actual CFC profit can elect to pay tax on a fixed profit instead. Until 2025 that figure was a flat 34 million rubles however many CFCs you held — about 5 million rubles of tax. From the 2025 tax period it scales with the number of companies: 27,990,000 rubles for one, climbing to 120,899,900 for five or more. In tax terms that works out to roughly 5 million rubles per CFC, capped at 25 million for five or more. The election locks you in for at least five years and switches off both the exemptions and the foreign-tax credit, so it suits large, genuinely taxable portfolios; small or already-exempt holdings are better off outside it.
What non-compliance costs
The fines are blunt and charged per entity. Missing or misstating the annual CFC notification costs 500,000 rubles for each company; missing the participation notification, 50,000 rubles per entity. Failing to supply the documents that prove a CFC's profit adds another 500,000 rubles, rising to 1,000,000 if you ignore a formal demand for them. Underpaying the tax itself carries 20% of the shortfall, with a 100,000-ruble floor.
Courts do soften this. Where a controlling person shows the CFC was dormant, that the budget lost nothing, or that sanctions made the documents impossible to obtain, fines have been cut several-fold. Requires verification: the specific reductions quoted in practice commentary could not be traced to a published judgment, so check the current case law before relying on any particular figure. An amended notification filed before the authority spots the error also erases liability, as long as it corrects existing entries rather than quietly adding companies that were never declared.
Deoffshorization and the treaty shock
The CFC rules arrived in 2015 to pull undeclared offshore wealth back into the tax net — the deoffshorization drive that also rewired how Russians use offshore companies and holding structures. For a decade the regime leaned on Russia's double tax treaties to credit foreign tax and to exchange information.
That footing shifted in August 2023, when Decree No. 585 suspended the core articles of 38 treaties with 'unfriendly' states. The residency definitions and the credit for foreign tax on CFC profit were kept on purpose, but information exchange and reduced withholding largely stopped; the treaties with Ukraine (2023) and Latvia (2024) lapsed altogether. Where sanctions blocked a CFC from paying out profit in 2022–2025, a special procedure lets the controlling person book calculated profit instead of dividends.
CFC legislation
For the precise statutory wording the Federal Tax Service maintains a dedicated CFC section, and the cross-border design it implements is laid out in the OECD's BEPS Action 3 final report.