Provision of comprehensive services to CFCs

Preparation of financial statements of CFCs under IFRS

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1. We check for supporting documents (translated into Russian) concerning operations that determine the tax base

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2. Prepare financial statements under IFRS. Financial statements are prepared based on documents provided (bank statements etc.)

(If necessary, we prepare financial statements in compliance with Russian Accounting Standards under the Chapter 25 of the Tax Code of the Russian Federation and estimate tax base in accordance with Russian tax legislation)

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3. We calculate the tax taking into account all possible deductions.

Audit of CFC financial statements under ISA

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1. We study financial statements of a foreign company.

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2. We analyse whether CFC may be exempt from income tax.

3. We check for supporting documents (translated into Russian) concerning operations that determine the tax base

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4. We draft Auditor’s Opinion.

Filling in and submission of tax returns

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1. We fill in tax returns and attach all necessary documents and statements.

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2. We submit tax returns in due time and communicate with tax authorities (if necessary).

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3. We represent beneficial owners before tax authorities of the Russian Federation.

Provision of advice to CFCs

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With our system approach, we help our clients solve the full range of matters related to owning CFCs and tax risk management.

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1. We assess the ownership structure and develop the relevant recommendations and offer practical solutions.

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2. We develop tax risk management techniques for the current/new ownership structure.

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3. We plan and calculate CFC’s income taxable in Russia.

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4. We plan and implement the transition to a new ownership structure.

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5. We arrange an effective paperwork process necessary for determination of CFC’s income and use of tax benefits (for CFC liquidation procedure, for example).

Why choose us

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Due to a strong network of members of International, ACG Yans – Audit can ensure a prompt and high quality preparation of financial statements (IFRS) and Auditor’s Reports (ISA) for CFCs irrespective of country of incorporation.

Our team

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More than 70 professionals work at our firm; of these, the audit department has:

14 certified auditors

7 auditors with the new form of unified certificate

2 auditors with an ACCA diploma

6 auditors with a DipIFR diploma

General information

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General provisions on CFCs

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Controlled foreign companies (CFCs) are foreign legal entities or unincorporated businesses controlled by Russian individuals or legal entities by means of membership interest or in any other way.

Control is a possibility for influencing decision-making related to distribution of after-tax profits.

Formal evidence of control:

– over 10% share in capital, if membership interest of RF residents is over 50%

– over 25% share in capital, if membership interest of RF residents is less than 50%

Consequences of recognition of CFC

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Income of CFC is treated as income of a controlling individual (personal income tax at 13%) or income of a controlling legal entity (income tax at 20%)

However, income taxes paid in CFC’s country of residence reduce taxes payable in the Russian Federation

CFC’s income is determined based on its financial statements audited by an independent auditor or under rules set forth in the Chapter 25 of the Tax Code of the Russian Federation.

In order to fulfill the duty of declaration of CFC, it is necessary to:

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1. File a notification on member ship interest in a foreign company (if membership interest changes, a new notice shall be filed)

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2. File a CFC notification (annually)

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3. On an annual basis, file a CFC Income Tax Return as part of a tax return (Form 3-NDFL, for individuals) and income tax return (for legal entities)

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4. Pay the tax (annually)

Tax liability

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Failure to provide the notification of the membership interest: 50 000 Roubles per document (Item 2 Article 129.6 of the Tax Code of the RF)

Failure to provide the CFC notification: 100 000 Roubles per annum (Item 1 Article 129.6 of the Tax Code of the RF)

Failure to file NDFL tax return: up to 30% of tax amount payable (Article 119 of the Tax Code RF)

Failure to pay the tax: 20% of the unpaid tax amount (Article 122 of the Tax Code of the RF)

Satisfied clients include