# CFC: declaration of controlled foreign companies > How controlled foreign company (CFC) rules force tax residents to declare and pay tax on foreign income: filing duties, thresholds and cross-border wealth risks. Author: Ксения Воронова — юрист, Family Office (https://wiki.private.law/authors/voronova) Last modified: 2026-06-04T06:12:00.000Z Canonical: https://wiki.private.law/en/kik Topics: investments Jurisdictions: russia Functional tags: cfc Semantic tags: cfc --- Lawyer, Family Office --- 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](https://wiki.private.law/en/eu-atad-cfc) regime even where the numbers differ. > 💡 The logic is the same everywhere: control plus low-taxed, undistributed passive income equals tax now, in the owner's home country. What changes between systems is only the control threshold, the profit floor and the catalogue of exemptions. # 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. Movements out to the third decimal place are ignored, so trivial fluctuations 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](https://wiki.private.law/en/russia-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](https://wiki.private.law/en/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 the Russian weighted-average rate (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. ## 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 — not small or already-exempt ones. # 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 — in one Moscow case from 250,000 to 50,000 rubles. 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](https://wiki.private.law/en/offshore-companies) and [holding structures](https://wiki.private.law/en/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. > 🧭 The practical reading: the filing duties have not loosened — they have tightened — while the treaty relief that once cushioned the tax has thinned. A classic holding in somewhere like [Cyprus](https://wiki.private.law/en/company-cyprus) now carries more reporting friction and less treaty shelter than it did a few years ago. # 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](https://www.oecd.org/en/publications/designing-effective-controlled-foreign-company-rules-action-3-2015-final-report_9789264241152-en.html). > 🍓 Bottom line: this is first a disclosure regime and only second a tax. The notification is owed whether or not a rouble is due; the deadlines are fixed — three months for participation, 20 March or 30 April for the annual filing; and the fines bite per company. Get the filing right and the tax usually looks after itself. Related links: [EU ATAD CFC](https://wiki.private.law/en/eu-atad-cfc) · [Economic substance](https://wiki.private.law/en/economic-substance) · [Holding structures](https://wiki.private.law/en/holding-structures) · [Offshore companies](https://wiki.private.law/en/offshore-companies) · [Cyprus company](https://wiki.private.law/en/company-cyprus) · [Foreign-account reporting](https://wiki.private.law/en/russia-foreign-account-reporting) · [Tax residency basics](https://wiki.private.law/en/tax-residency-basics) --- --- ## Factual claims - Lawyer, Family Office - 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 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. - 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%. - 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. - That footing shifted in August 2023, when Decree No. - 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.