In this review, we have summarized the rules governing the required notifications and reports that must be filed in the Russian Federation if you have (or are acquiring) a share in a foreign organization.

When creating/acquiring a share in a foreign organization: notification

When a share in a foreign organization arises (or changes), regardless of the size of the share, an individual who is a tax resident of the Russian Federation must file a notification of participation in foreign organizations (on the establishment of foreign structures without forming a legal entity).

This notification must be filed no later than three months from the date of the emergence (change in share) of participation in a foreign organization.

Failure by a taxpayer to submit a notification of participation in foreign organizations to the tax authority within the prescribed period or submission of a notification of participation in foreign organizations containing inaccurate information entails a fine of 50,000 rubles for each foreign organization.

What is considered a controlled foreign organization (CFO)?

A controlled foreign company is a legal entity or a structure without the formation of a legal entity, the place of tax residence of which is a jurisdiction other than the Russian Federation, controlled by a legal entity or an individual who is a tax resident of the Russian Federation.

When creating / acquiring a share in a CFC (controlled foreign organization)

When a share in the CFC arises (changes) the individual must submit a notification of controlled foreign companies to the tax authority at the place of registration during the reporting year, but no later than April 30 of the year following the reporting year. The deadlines for sending an annual notification of a CFC to the Federal Tax Service for individuals are set out in Article 25.14 of the Tax Code of the Russian Federation.

The notification form is set out in legislation.

In addition to the notification form itself, it is necessary to collect a package of documents on the controlled foreign company and its participant. Typically, this list includes:

1. Certificate of registration of the organization and an extract from the trade register;

2. Certificate of the state – tax registrar;

3. Financial statements of the CFC, prepared in accordance with the personal law of such a company for the financial year. In case of its absence, it is necessary to submit other documents that confirm the profit or loss of the company;

4. Auditor’s report on the financial statements of the CFC, if the audit is mandatory or the company voluntarily conducted an audit;

5. Copy of the passport of the CFC participant;

6. Notarized power of attorney in case of notification by a third party.

If the original documents are attached not in Russian, a notarized translation is required.

Calculation of the tax base for the CFC

The minimum amount of CFC profit that can be used as a taxable base is 10 million rubles, CFC profit below this amount is not taxed in the Russian Federation and is not subject to declaration.

If the profit of a controlled foreign company exceeds 10 million rubles, it is used as a tax base for calculating income tax and is filled in the 3-NDFL declaration (Sheet B) for individuals. Information on each CFC is submitted separately, the data is not summarized. Declarations must be submitted to the Federal Tax Service as part of the normal procedure for filing declarations along with other sheets of the document.

Particular attention should be paid to determining the date of receipt of profit from the CFC by the controlling person – December 31 of the year following the tax year of the foreign organization. The dates of receipt of profit and reporting on it are clearly presented in the diagram:

From December 1, 2021, in accordance with amendments to the Federal Law “On Communications” No. 126-FZ dated July 7, 2003, corporate mobile communications will be provided to organizations and individual entrepreneurs only if there is data about the corporate communications user in the Unified Identification and Authentication System (ESIA).

If this requirement is not met, organizations will be disconnected from corporate communications services from December 1.

What is ESIA?

ESIA is a Russian information system used for authorization on the state portal “Gosuslugi”.

How is data entered into ESIA?

Data is entered into ESIA in three stages. The procedure is as follows:

The organization enters the following information about employees using corporate mobile communications in its personal account on the website of the operator providing corporate communications:

personal data of an individual (passport data);
subscriber number;
name of the organization / full name of the individual entrepreneur.
Employees who have access to the personal account of the corporate communications operator can also enter information about themselves.

The employee confirms the transfer of information through the personal account on the State Services portal, after which the information is sent to the mobile operator.
The mobile operator enters the data into the Unified Identification and Authentication System.
When should the information be provided?

Data on users of corporate mobile communications under contracts concluded before 01.06.2021 must be entered into the system no later than 30.11.2021. When starting to use corporate mobile communications from June 1, 2021, the information must be transferred to the operator before the start of services.

Corporate users using M2M (Machine to machine) SIM cards for ATMs, POS terminals, video surveillance systems, the deadline for submitting information, according to Government Resolution No. 844 of 05/31/2021, must provide information no later than September 1, 2021.

In the conditions of the current world crisis and increasingly strict measures to combat the virus, business is much more than usual counting on assistance and support measures from the state.

At the moment, many support measures are being developed and implemented in Russia, starting from the postponement of reporting deadlines and preferential lending up to measures to reduce the tax burden (in particular, insurance premiums). A significant part of these measures is aimed at supporting small and medium-sized businesses.

Briefly, let us remind you that the status of SMEs and the criteria are prescribed in the Federal Law No. 209-FZ dated 07.24.2007 with subsequent amendments.

Meaning has:

the size of the average number of employees for the previous calendar hour (up to 100 people for small enterprises; up to 250 people for medium-sized enterprises);
the amount of income from conducting business activities for the preceding calendar year (up to 800 million rubles for small enterprises; up to 2 billion rubles for medium-sized enterprises);
To obtain SME status, the company must also be entered in the appropriate register (https://rmsp.nalog.ru/).

For a long time, the status of an SME was closed to companies with a large share of foreign capital, since in addition to the threshold values ​​indicated above, there was a restriction on the share of Russian capital at a minimum of 51%.

Does this mean that subsidiaries of foreign founders will not be able to take advantage of the benefits and preferences offered by the government?

We remind you that December 1, 2018 certain clauses of the Federal Law No. 313-FZ “On Amendments to the Federal Law “On the Development of Small and Medium Enterprises in the Russian Federation” entered into force, according to which the criteria for the status of an SME subject were changed. We wrote about this in our review 02/2018 dated 08/22/2018. After the entry into force of these amendments, the status of an SME became available to those companies in which the share of foreign participation exceeds 49%.

At the same time, a necessary condition is the compliance of the parent company with the criteria of small and medium business established in the Russian Federation.

However, Russian companies with more than 49% foreign participation will be able to be entered into the Register (see above), that is, to officially receive SME status, only after the reporting of their parent organizations is checked for compliance with the SME criteria in force in Russia.

Authorized auditing organizations, entered in the control copy of the register of auditors and auditors, carry out similar checks organizations

Olga Grigoryeva, general director of Shternhoff Audit LLC, comments:

“According to part 6.2 of article 4.1 of the Law on SMEs, the source of such data for maintaining a single register of small and medium-sized enterprises are auditor organizations. This authority is implemented in the following order:

1) the auditing organization provides auditing services (at the initiative of the economic entity) to economic entities interested in including information about them in the unified register of SME entities. The service consists in confirmation by the auditing organization of the compliance of the participants of the economic society – foreign legal entities with the above criteria (confirmation is carried out annually).

This audit service is provided by audit organizations in accordance with:

Part 6.2 of Article 4.1 of the Federal Law “On the Development of Small and Medium-Sized Entrepreneurship in the Russian Federation” (as amended by Federal Law dated August 3, 2018 No. 313-ФЗ);
The international standard, which provides confidence (MSZOU) 3000.

2) in order to confirm the indicated compliance, the auditing organization compares the data on the amount of income per hour and the average number of employees of the foreign legal entity with the above criterion. For comparison, the company-customer of the service must present to the auditing organization the report of the foreign legal entity for the corresponding year, submitted to the tax authority of the country where the entity is established;

3) based on the results of the provision of this service, the auditing organization forms a list of companies that were created before December 1 of the year preceding the current calendar year, and whose participants are foreign legal entities that meet the criteria described above;

4) the auditing organization sends a list of such companies to the Federal Tax Service of Russia. The list is presented in the form of an electronic document, signed with an enhanced qualified electronic signature, using the official website of the Federal Tax Service of Russia. The deadline for submitting the list is from July 1 to July 5.”

According to the currently presented explanations and comments, only companies with official status, that is, entered in the register, will be able to take advantage of the proposed preferences for SMEs in the Russian Federation.

It is not yet clear whether this regulation will be clarified. In this regard, we recommend checking the relevance of the procedure described above for your company.

We will be happy to answer your questions on this and other topics!