Attorney, Family Office

The Russian Federal Tax Service (FTS) requires tax residents to pay tax not only on income earned in Russia, but also on income received abroad.

For these purposes tax residents are obliged to notify the FTS of their participation in foreign entities and to submit their financial statements annually.

These obligations exist within the framework of the Controlled Foreign Companies (CFC) regime, which is explained in detail in this guide.

Key Definitions

CFC — a foreign entity in respect of which financial reporting must be submitted, e.g., a company in Hong Kong
Controlling Person — the individual required to submit notifications on the CFC and pay tax on its income, e.g., the 100% shareholder of a Hong Kong company

❓What is a CFC and a Controlling Person

Notification of Participation

Upon acquiring an interest in a CFC regardless of the basis — e.g., incorporation, share acquisition, or inheritance — the controlling person must submit a notification of the beginning of participation.

📮Notification of the Beginning of Participation in a CFC (1)

If any information regarding participation in the CFC changes — e.g., change in shareholding percentage or type of participation — the controlling person is obliged to submit a notification of change in participation.

If the controlling person ceases participation in the CFC — e.g., due to liquidation, sale of shares, or donation — a notification of termination of participation must be submitted.

Annual Notification

From the moment of submitting the notification of the beginning of participation and until the notification of termination the controlling person is required to annually submit the CFC’s financial statements.

Tax Obligations

The obligation to submit all types of notifications serves a single purpose — to determine whether the controlling person is liable to pay tax on the CFC’s profit.