PROBLEMS OF LEGAL REGULATION OF CONTROLLED FOREIGN COMPANIES IN THE RUSSIAN FEDERATION
( Pp. 262-268)
More about authors
Ivan A. Kuznetsov
Financial University under the Government of the Russian Federation
Moscow, Russian Federation Svetlana A. Savostyanova
Financial University under the Government of the Russian Federation
Moscow, Russian Federation
Financial University under the Government of the Russian Federation
Moscow, Russian Federation Svetlana A. Savostyanova
Financial University under the Government of the Russian Federation
Moscow, Russian Federation
Abstract:
The article analyzes the concept of a controlled foreign company, obligations of a controlling person, the history of formation and development of legal regulation of controlled foreign companies abroad and in the Russian Federation. The aim of the research is to analyze the provisions of Russian legislation related to the legal regulation of controlled foreign companies, as well as to identify positive and negative aspects for controlling persons in the light of the recent changes in legislation on taxes and fees, which came into force since 2021 in the Russian Federation. Conclusions. The issue of recognition of a foreign company as a tax resident of the Russian Federation is a cornerstone in law enforcement practice, which is currently not in favor of the tax authorities. In our opinion, in order to clarify the procedure for recognizing a foreign company as a tax resident of the RF in connection with its management from the territory of the RF, it is necessary to provide for additional criteria in the Tax Code of the RF. In particular, it is necessary to fix in the Tax Code a provision, in accordance with which the heads of a foreign company must have Russian citizenship and their activity should be carried out mainly on the territory of the Russian Federation. The legislative provision concerning the submission of financial statements for controlled foreign companies (hereinafter referred to as «CFC») incorporated in the territory of the EAEU also needs to be regulated in more detail. In practice, situations arise where tax authorities interpret the provisions of tax legislation on this issue at their own discretion. In addition, there are different approaches to this issue in the explanations of the Russian Ministry of Finance and the Russian Federal Tax Service. Thus, the Russian Ministry of Finance takes the position that controlling persons have no obligation to submit financial statements, while the Russian Federal Tax Service states that it is the duty of the controlling person to submit statements. In our opinion, the controlling persons of CFCs registered in the territory of the EEU can be exempted from this obligation, because the profits of such companies are exempt from taxation3. Financial statements are required only to determine whether a taxpayer exceeds or does not exceed the thresholds established by the Tax Code of the Russian Federation. We consider it necessary to supplement Article 129.6 of the Tax Code with an indication of extenuating circumstances, which has been worked out by court practice. Thus, among these circumstances may be provided for reduction of the penalty for failure to submit a CFC notification on time if the taxpayer had no intent to commit an offense, the taxpayer's admission of guilt, insignificant time of delay, no damage to the budget, for example, if the CFC's profit does not exceed threshold values. In our opinion, taking into account these circumstances will meet the principles of proportionality and fairness of punishment. The introduction of a fixed tax on CFC profits has both positive and negative consequences for taxpayers who are entitled to apply it. Among the positive aspects is the fact that the controlling person is exempted from the obligation to submit financial statements to the RF tax authorities. In addition, in terms of tax planning a fixed tax may be useful for those controlling persons whose amount of profit of the CFC is much more than 10 million rubles4. Among the negative aspects is the fact that the tax authorities have the right to request reporting after the deadline for payment of the tax in the fixed amount from the profit of the CFC. It should be emphasized that the tax on the fixed profit of CFCs is calculated and paid regardless of the financial results of the company. It is also worth noting that the taxpayer has no right to offset losses from previous years. In addition, when paying tax on the fixed profit of a CFC, the controlling person will not be able to offset taxes paid outside the territory of the Russian Federation.
How to Cite:
Ivan A.K., Svetlana A.S., (2021), PROBLEMS OF LEGAL REGULATION OF CONTROLLED FOREIGN COMPANIES IN THE RUSSIAN FEDERATION. Economic Problems and Legal Practice, 3 => 262-268.
Reference list:
Department of the Treasury. The Deferral of Income P. 12; U.S. National Foreign Trade Council. The NFTC Foreign Income Project: International Tax Policy for the 21st Century, Part One: A Reconsideration of Subpart F (25 March 1999). Electronic resource URL: http://www.nftc.org/default/tax/fip/NFTC1a 20Volume1 part1.pdf (data obrashcheniya: 16.06.2021);
Message from the President of the United States Relative to our Federal Tax System, H.R. Doc. No. 140, 87th Cong., 1st Sess 6, 26 (1961);
Dahlberg M., Wiman V. The Taxation of Foreign Passive Income for Groups of Companies P. 26-27;
Platezhnyy balans Rossiyskoy Federatsii v 2001, 2007, 2009, 2011 i 2013 gg. / Ofitsial nyy sayt Banka Rossii. URL: http://www.cbr.ru/ (data obrashcheniya 17.06.2021);
Panichkin V. B. Anglo-amerikanskoe trastovoe pravo: monografiya. - M.: Prospekt, 2020. - 544 c.
Message from the President of the United States Relative to our Federal Tax System, H.R. Doc. No. 140, 87th Cong., 1st Sess 6, 26 (1961);
Dahlberg M., Wiman V. The Taxation of Foreign Passive Income for Groups of Companies P. 26-27;
Platezhnyy balans Rossiyskoy Federatsii v 2001, 2007, 2009, 2011 i 2013 gg. / Ofitsial nyy sayt Banka Rossii. URL: http://www.cbr.ru/ (data obrashcheniya 17.06.2021);
Panichkin V. B. Anglo-amerikanskoe trastovoe pravo: monografiya. - M.: Prospekt, 2020. - 544 c.
Keywords:
controlled foreign companies, controlled foreign structures, controlling person, duties of controlling persons, financial reporting, OECD, Beeps plan, EAEC.
Related Articles
Private Law (Civil) Pages: 31-42 DOI: 10.33693/2782-7372-2024-3-1-31-42 Issue №35446
The Coverage of Pension Savings Plans in the OECD Countries
FDC
NDC
pension coverage
quasi-mandatory pension
automatic enrolment
Show more
Sociology of Management Pages: 87-92 DOI: 10.33693/2223-0092-2023-13-1-87-92 Issue №22854
Analysis of modern foreign methods in the field of sustainable development assessment
ICAT
INSEE
sustainable development
assessment methodology
integral indicator
Show more
Accounting, statistics Pages: 92-98 Issue №14823
IMPACT OF IFRS ON FINANCIAL REPORTING PRACTICES IN TAJIKISTAN
IFRS
accounting
financial reporting
accounting regulations
investments
Show more
4. ACCOUNTING, STATISTICS Pages: 112-118 Issue №18204
Reporting competitiveness management
management
competitiveness
agricultural enterprises
management reporting
financial reporting
Show more
INTERNATIONAL LAW SCIENCES Pages: 138-141 Issue №166197
Mechanisms of International Legal Cooperation to Regulate the Use of Marketplaces
marketplace
trading platform
UNCITRAL
OECD
e-commerce
Show more
3. ACCOUNTING, STATISTICS 08.00.12 Pages: 131-137 Issue №18758
The future of corporate reporting
corporate reporting
financial reporting
non-financial reporting
integrated reporting
evolutionary adaptive balance theory
Show more
4. ACCOUNTING, STATISTICS Pages: 142-147 Issue №18204
Trends in the activities of Russian telecommunications companies based on the analysis of the dynamics of reporting indicators
infrastructure
telecommunications industry
Telecom
telecommunications market
IFRS
Show more
10. FINANCIAL LAW; TAX LAW; BUDGETARY LAW Pages: 248-252 Issue №18204
Risky business model as a basis for attracting persons controlling a credit institution to recover losses
business model
controlling person
bankruptcy
liability
reasoned judgment
Show more
12. INTERNATIONAL LAW; EUROPEAN LAW 12.00.10 Pages: 295-301 Issue №18758
The OECD's Base erosion and profit shifting (BEPS) Global Initiative
tax minimization
profit shifting
digitalization
OECD
developing countries
Show more
16. International law; European Law Pages: 263-266 Issue №12273
FEATURES OF SUPRANATIONAL REGULATION OF THE TAXATION OF PROFIT OF CONTROLLED FOREIGN COMPANIES IN EUROPEAN UNION
controlled foreign companies
The European Union
taxation of profits
Show more