Putin signed a law to increase the attractiveness of “Russian offshore companies”

President Vladimir Putin signed a law that amends the Tax Code to expand preferences for residents of special administrative regions (SARs), or “Russian offshore companies.”

“Russian offshore companies” are located on the islands of Russky (Primorsky Territory) and Oktyabrsky (Kaliningrad Region). The amendments expand the ability of international holding companies (IHCs) to choose the form of investment for reduced income tax rates.

Now such companies are required to invest at least 300 million rubles within three years after the start of application of reduced tax rates. in the construction or reconstruction of socio-cultural, transport, energy, housing and communal services or engineering infrastructure in the region where they are registered.

The amendments also allow investing in machinery (except for passenger cars), equipment, tools and inventory intended for use at such facilities. Transactions involving the transfer to regional or municipal ownership of the results of work and property created by MCC as part of investment requirements will be exempt from VAT.

MHC now has the right to make voluntary monetary donations in the areas of construction, reconstruction or re-equipment of facilities. Recipients can be a subject or a municipality or organization located on its territory. The law also extends the period of opportunity to use office premises outside the SAR – in Kaliningrad and Vladivostok.

In 2022, against the backdrop of sanctions, Russian authorities allowed Russian companies to register in the SAR and receive the status of an international holding company. However, this may be prevented by the authorities of the region from which the company is moving: for example, if the share of the company’s tax revenues in the budget of this region exceeds 1% for at least one of the last three years.

The Ministry of Economy expects that tax revenues from the SAR in Vladivostok and Kaliningrad will grow “geometrically.” Funds will mainly come as taxes on dividends of international holdings.

More details in the material “Russian offshore companies have been added to their attractiveness”.

Anastasia Larina