What is a CFC

A Controlled Foreign Company (CFC) is:

a foreign legal entity — for example, a company in Hong Kong, or
a structure without legal personality — for example, a trust, foundation, partnership or association

controlled by a person recognized as a tax resident of the Russian Federation.

Who is a Tax Resident of Russia

An individual — a person who is physically present in Russia for at least 183 days in a calendar year.
A legal entity — a legal entity registered in Russia, as well as its branches, representative offices and other subdivisions located abroad.

Who is a Controlling Person of a CFC

An individual or legal entity recognized as a tax resident of Russia based on one or more of the following criteria:

Participation Criterion

a share of direct or indirect participation exceeding 25%;
a share of direct or indirect participation exceeding 10%, if the entity has other Russian tax residents whose combined interest exceeds 50%.

What is direct or indirect participation?

Direct participation — the person directly owns a share in the CFC. For example, an individual owns 50% of a company in Hong Kong.

Indirect participation — the person owns a share in the CFC through another CFC. For example, an individual owns 100% of a company in Hong Kong, which owns 50% of a company in China. Then the individual has 50% indirect participation in the Chinese company.

Control Criterion

has the ability to influence decisions regarding the distribution of profits due to any type of participation in the company or under an agreement involving the management of the entity.