A procedure has been prepared for extending the deadline for leaving foreign registers when moving to the SAR
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The Ministry of Economy has prepared a procedure for issuing individual permits to extend the deadlines for “exiting” from foreign registers for companies “moving” to special administrative regions (SARs). This option is relevant for businesses that, due to sanctions, cannot obtain the necessary documents or take advantage of the accelerated redomiciliation procedure, which allows them to “move” to the SAR without completing their “exit” from the foreign jurisdiction. Experts note that the problem of companies being stuck in two registers is very significant.
The Ministry of Economy has published a draft government decree establishing the procedure for extending the deadlines for leaving foreign registers for companies “moving” to the SAR on the Russky Islands in Primorye and Oktyabrsky in Kaliningrad. Let us explain that when “moving”, foreign organizations register an international company in the Russian Federation and are excluded from the foreign register within two years. However, not everyone can meet this deadline: due to sanctions, companies sometimes do not receive the documents necessary for “exit”, and then they, as residents of the SAR, are deprived of tax benefits (if they are entitled to them).
The authorities discussed increasing the period of “moving” from two to five years, but in the end a law was passed to provide additional time on an individual basis. Such decisions are made by the government commission on foreign investment if a foreign company is unreasonably or for reasons beyond its control denied exclusion from the register or if three or more requests for “exit” are left unanswered. According to the first deputy head of the Ministry of Economy, Ilya Torosov, this procedure was chosen “to eliminate the possible deliberate delay in the period of exclusion of companies from the foreign register.”
The presented draft resolution implements the adopted norm of the law. According to the document, an application to the Ministry of Economy must be submitted no earlier than two months before the expiration of the two-year period, along with a package of documents that includes confirmation of the termination of the commercial and operational activities of a foreign legal entity in a foreign jurisdiction, as well as the existence of grounds for extending the period. The period is extended for a maximum of one year, but if necessary, you can ask for an extension again.
As the RSPP notes, the problem of companies being “stuck” in two registers “can hardly be called widespread, but these are definitely not one-off cases.” Partner in the tax practice of Trust Technologies, Galina Naumenko, notes that “more than 50% of companies entering the SAR since 2022 face difficulties with deregistration, and of the companies subject to sanctions, perhaps all 80%.”
The chosen approach, believes partner B1 Marina Belyakova, is “absolutely appropriate in the current realities”: on the one hand, it is illogical to limit the deadline for everyone without the possibility of extension if it is difficult to leave abroad; on the other hand, “making the deadlines very long and letting go of control is also wrong ” Anastasia Simonova, head of the international legal department of K&P.Group, agrees with this. According to her, the possibility of issuing individual decisions “allows for greater determination to complete the redomiciliation, while the introduction of a single deadline is a less flexible mechanism.”
The extension, says Alexander Tokarev, a partner in the international tax planning services group Kept, is relevant for companies that, due to the geopolitical situation, took advantage of accelerated redomiciliation, which allows them to register in the SAR before completing the necessary procedures in a foreign jurisdiction. As Marina Belyakova adds, this may formally be a violation that prevents exit from a foreign registry. In addition, she says, in some countries, for example in Cyprus, permission from the sanctions commission is required for sanctioned companies to leave the register – “some companies are still waiting for such permissions, but it is possible that they may receive refusals.”
Experts on the mechanism for extending the “move” deadline
Alexander Tokarev, partner in the international tax planning and restructuring services group at Kept, notes that questions may arise regarding documents confirming the termination of activities in a foreign jurisdiction, since there are no standardized forms for them. “Is it sufficient, for example, for a resolution on the dismissal of foreign directors, orders to dismiss foreign employees, termination of an office lease agreement or an agreement on its sale, since it will be difficult to provide adjusted reporting in relation to a foreign company?” – the expert asks. It would be desirable, he adds, for the Ministry of Economy to explain what documents the company can prepare.
Partner in the tax practice of Technologies of Trust, Galina Naumenko, believes that the format will most likely still be “polished” – the main difficulty is that it is almost impossible to prove the absence of a result and attempts to achieve it through documentation. However, she says, the rules “show the government’s desire to really understand the company’s position—I was pleased that an appeal is possible even if there is a shortage of some documents, if the company explains the impossibility of obtaining them.”
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