The article referenced in the above tweet from Norton Rose, provides an introduction to Russia’s CFC (“Controlled Foreign Corporation”) rules. The Russian CFC rules include both:
- an attribution of income for purposes of taxation; and
- penalty laden reporting requirements.
There are presently huge incentives for Russian high net worth individuals to to break “tax residence” with Russia and find more favorable jurisdictions. It is a “perfect storm”. These incentives include:
• The “De-offshorisation” initiative of the Russian government, including introductions of CFC rules that came into force on January 2015
• The enforcement of pre-existing rules established by Russian Federal Law Nr. 173-FZ “On Currency Regulations and Currency Control” (CCL) by amending RF Administrative Offence Code (AOC) in February 2013 (Russian FBAR coupled with “Russian citizenship reporting“)
• The adoption of the OECD’s Common Reporting Standard (CRS) in May 2016 and what that means for those with “tax residency in Russia”
Prologue – A law firm perspective …
As reported by Chelco Vat:
The law does not make dual citizenship illegal; it is merely a reporting requirement.
Federal Law No. 142-FZ on Amendment of Articles 6 and 30 of the Federal Law on Russian Federation Citizenship and Individual Regulations of the Russian Federation, which took effect on 4 August 2014, makes it a criminal offence for Russian nationals to conceal dual citizenship or long-term residence abroad.
Hmmmm … ONLY a reporting requirement you say …
The perspective of an individual subject to the citizenship-reporting requirement …
The above tweet references an article in the New York Times discussing Russia’s law that requires all Russians with a second foreign citizenship report that foreign citizenship to the Government.
It has been widely reported that American actor Steven Seagal has joined American boxer Roy Jones in becoming a citizen of Russia. By becoming Russian citizens, Mr. Seagal and Mr. Jones are now subject to Russia’s Currency laws, which include the requirement to report their non-Russian bank accounts to the Kremlin. Messrs Seagal and Jones may admire Russia. That said, it’s clear that the Kremlin admires the U.S. Treasury in general and Mr. FBAR – America’s most important citizen – in particular.
Citizenship-based reporting: Mr. FBAR as a role model for President Putin and the Russian government …
Although Russia has “residence-based taxation” it has “citizenship-based reporting”.