'Deoffshorization' law to earn Russia $425 million annually

The implementation of the law on the 'deoffshorization' of the Russian economy is expected to bring about 20 billion rubles (some $425 million) to the budget, Interfax reports on Wednesay, citing Deputy Finance Minister Sergei Shatalov. The bill was recently approved by both houses of Russian parliament. Shatalov said the law was only the first step and that Russia planned to exchange relevant information with the countries where offshore companies are registered. This would be done within the framework of the Convention on Mutual Administrative Assistance in Tax Matters, which over 60 countries including Russia have signed. The deputy minister said that not all companies established in the countries with which Russia has double taxation agreements are suspected of tax avoidance. “We need to start by establishing whether a company in question receives an active or a passive income. Only companies that have a passive income and pay a lower than usual tax will have additional tax obligations to their home country,” Shatalov said.

http://www.rapsinews.com/legislation_news/20141119/272614826.html

Minister: 20% of Russians Work in Shadow Economy

Up to a fifth of Russians work in a shadow economy that does not generate adequate tax payments, the country’s labor minister said Friday. “Fifteen to 20 percent of citizens” work jobs that do not provide proper tax and social security payments to the government, Maxim Topilin told an economic forum in Moscow. “I believe that it is simply unfair for those who work legally and pay all their taxes to support those who shirk such responsibility,” the minister said. He called for stricter legislation as well as economic incentives to promote transparency among Russian businesses.

http://en.ria.ru/business/20140117/186625841/15-20-of-Russians-Work-in-Shadow-Economy.html

After Fleeing French Taxation, Depardieu Willing to Pay Taxes in Russia

French film star Gerard Depardieu has received a sole business owner’s certificate in the city of Saransk, Depardieu’s friend Nikolai Borodachov told RIA Novosti on Monday. Depardieu obtained Russian citizenship and residence registration earlier this year. The actor has now decided to register a business in Saransk to pay taxes from his profits in Russia. “Depardieu has received his entrepreneur’s certificate,” said Borodachov, who heads Gosfilmofond, the Russian State film archive. “All the legal documents are in order.” Borodachov said earlier that the actor planned to engage in theater and cinema projects in Russia. Depardieu also mentioned plans to open a café in Saransk, the capital of Mordovia. Depardieu received fast-tracked Russian citizenship back in January, and collected his new passport at a meeting with Russian President Vladimir Putin. He said he had renounced his French citizenship ahead of the government’s planned implementation of a 75 percent tax rate for annual earnings above $1.3 million. Russia has a single-band income tax of just 13 percent.

http://www.rapsinews.com/news/20130520/267468779.html

Deputy PM: 38 mln Russians Work Illegally

Half of Russia's employable population is engaged in the shadow sector of the economy, according to Deputy Prime Minister Olga Golodets. Eighty-six million people are employed in various economic sectors, of which only 48 million are said to be working in legitimate businesses. "We don’t understand where and how the rest are employed," Golodets told a conference at Moscow’s Higher School of Economics. "Our labor market is practically illegitimate, with only a tiny sector functioning under transparent rules," she added. “With the shadow sector this large, we have lack of funding for all our social costs,” Golodets pointed out, adding that Russia is at least 20 years behind other countries on the international labor market in terms of the level of employment. It’s hoped that the problem could be solved with a new law defining professional standards in Russia. According to the World Bank, Russia’s shadow economy is 3.5 times bigger than in other G8 countries, with ineffectiveness of public administration and tax evasion holding back the country’s economic and political advancements.

http://rt.com/business/labor-market-shadow-economy-270/
http://www.echo.msk.ru/blog/echomsk/1045218-echo/ (video)

Kyrgyzstan Aims to Strip Canadian Gold Firm of Tax Status

Kyrgyzstan’s cash-strapped government wants to renegotiate its agreement with its largest foreign investor, Toronto-based Centerra Gold, and to end the company’s privileged tax regime, Economics Minister Temir Sariyev said Monday. His comments came after the Kyrgyz Cabinet of Ministers approved recommendations by a state commission on Friday to cancel Centerra’s existing contract for the high-altitude Kumtor gold mine and charge the company higher taxes. “Taxes must be paid on the basis of the country’s tax code rather than some other agreements. The existing agreement signed in 2009 stipulates special terms of operation and tax payments for Kumtor,” Sariyev said. Centerra currently pays a 13 percent tax on its gross revenue and another 1 percent into a special fund for the development of the Issyk Kul Region, where Kumtor is based. The minister said other enterprises pay 17-20 percent and are demanding comparable terms. Centerra’s management has said it may turn to international arbitration if the Kyrgyz government refuses to honor existing legal guarantees.

http://www.rapsinews.com/news/20130129/266218447.html

Russia Prosecutes Magnitsky Posthumously

A Moscow court had to postpone a preliminary hearing in the posthumous trial of Sergei Magnitsky on Monday, following a boycott from his relatives. The dead lawyer is charged with tax evasion.  The court had to appoint a defense attorney to represent Magnitsky, a lawyer with Hermitage Capital who died from a lack of medical care in custody in November 2009, after his mother and lawyers refused to take part in Monday’s hearing. “Today’s preliminary hearing was postponed till February 18, 11 a.m.,” because Magnitsky’s representatives didn’t show up, court spokeswoman Alexandra Berezina told journalists, the RAPSI news agency reported. In order to preserve the principle of equality in the trial, the judge appointed the defense, she said. Amnesty International criticized the trial as “Kafkaesque,” saying Russian prosecutors violated a fundamental right of a defendant to represent himself in person. Magnitsky was arrested in November 2008 on tax evasion charges, after he exposed what he believed was a $230 million tax fraud scheme implemented by Russian officials. Suffering from serious health problems, he died untreated of heart failure at Moscow’s prison hospital. He was 37 years old. An independent investigation ordered by the Kremlin’s human rights council unveiled that he had been beaten with batons shortly before his death. The only prison official who faced trial over his death was acquitted in December.

http://en.ria.ru/world/20130129/179091348/Russia-to-Start-Posthumous-Trial-of-Magnitsky.html

French Actor Depardieu Gets Russian Passport

French film star Gerard Depardieu received a Russian passport at a meeting with Russian President Vladimir Putin in the Black Sea resort of Sochi. The legendary French actor said he was glad to be granted Russian citizenship, adding that he loves Russia and promising to study the Russian language. Depardieu recently renounced his French citizenship and settled in the Belgian border town of Nechin. His decision to settle in Belgium came ahead of the Socialist government’s initially planned implementation of a 75 percent tax rate on annual earnings above $1.3 million. By comparison, Russia has a fixed 13 percent income tax. France’s highest court later rejected the controversial government proposal to impose a “super-tax” on the wealthy, deeming it discriminatory and therefore unconstitutional. Meanwhile, French actress Brigitte Bardot has threatened to follow her colleague Gerard Depardieu and apply for Russian citizenship too. Renowned actress and animal rights campaigner, 77-year-old Bardot said that she will have to become Russian in case the French authorities do not drop their plan to put down two sick elephants at a zoo in Lyon.


http://en.ria.ru/russia/20130106/178607303/French_Actor_Depardieu_Gets_Russian.html
http://en.ria.ru/russia/20130104/178582292/Actress_Bardot_Threatens_to_Become.html
http://rt.com/art-and-culture/news/putin-russian-citizenship-depardieu-260/ (video)

Moët Hennessy Wins $1 Mln Tax Case in Russia

The Moscow Commercial Court has ruled in favor of Моеt Hennessy International's Russian subsidiary Moet Rus by overturning a $1.04 million tax service assessment, including fines, against the company. The penalties were charged against the company following a 2009-2010 audit. Moet Rus appealed the tax service's decision in court. In participial, Moet Rus paid dividends to its Cyprus parent, MHWH Ltd, and, as a tax agent, withheld taxes amounting to five percent. This rate is stipulated by the bilateral agreement between Russia and Cyprus on double taxation. But the tax service ruled that the 15 percent rate applies since Moet Rus allegedly have not proved that MHWH Ltd was based in Cyprus. The court, however, found that the 2008 tax residency certificate from the Cyprus authorities was sufficient grounds to confirm the company's status.

http://www.rapsinews.com/judicial_news/20120810/264213254.html

Russian Court: DTTs Do Not Override Thin Cap Rules

The Supreme Arbitrazh (Economic) Court (VAS) published its Presidium (acting as the last-instance economic court) decision resolving the much debated issue of whether or not an international double-tax treaty (DTT) overrides the Russian national thin capitalization rules, applicable to loans from foreign parent companies. According to the VAS’ holding in the Severny Kuzbass case, the non-discrimination clause of a DTT does NOT override the thin cap legislation. Accordingly, interest payments made to a foreign parent may be taxed differently from those made to a Russian parent.

http://www.kommersant.ru/doc/1849093
http://www.arbitr.ru/bras.net/f.aspx?id_casedoc=1_1_8fb6828f-7e79-45f6-9652-2b9f002eede7 (document)

New Charges Filed Against Ukraine's Tymoshenko

A lawyer for former Ukrainian Prime Minister Yulia Tymoshenko said today that prosecutors have filed four new criminal charges against her. Lawyer Serhyi Vlasenko said all charges are tax-related and connected with her management of a natural gas import company in Ukraine during the 1990s. A Kyiv court in October found Tymoshenko, the most prominent leader of Ukraine's political opposition, guilty of illegally ordering the signing of a 2009 natural-gas import agreement with Russia, and sentenced her to seven years in prison. Western nations criticized Tymoshenko's jailing as politically motivated.

http://www.rferl.org/content/tymoshenko_ukraine_new_charges/24383531.html

Russian Tax Official Found to Have Fortune after Magnitsky Case

The colleagues of Sergei Magnitsky, the late tax advisor to Hermitage Capital, published the results of their independent investigation that appears to show that that officials whom Magnitsky had implicated in a tax fraud have become extremely wealthy. Magnitsky accused several Interior Ministry officials of having used three Hermitage subsidiaries in a scheme with tax officials to receive an illegal tax refund of $230 million. Shortly after that Magnitsky was arrested and later mysteriously died in jail. Magnitsky’s claims have never been fully investigated by Russian law-enforcement bodies. Now Magnitsky’s supporters, including William F. Browder, the owner of Hermitage Capital Management, published their own findings on a web site. Among the officials that were investigated is Olga Stepanova, the former head of Moscow’s 28th District Tax Inspectorate. Three weeks after her office was said to have approved a portion of the tax refund in question, Stepanova made a $629,030 down payment on a luxury apartment in Dubai. In addition to the Dubai apartment, Stepanova and her husband (a construction worker) bought a large villa in Dubai and another in Montenegro, and built an 11,900-square-foot house outside of Moscow, according to the investigation. In total, Stepanova acquired nearly $39 million in assets and cash after her office authorized the tax refund. According to their tax returns, Stepanova and her husband had been making a combined salary of just under $40,000 annually.

http://www.nytimes.com/2011/04/19/world/europe/19russia.html?_r=1
http://russian-untouchables.com/eng/
http://youtu.be/H7yBOEPYJTc (video)

Moscow Police Search Federal Tax Service Offices

The Moscow police conducted searches in a Federal Tax Service (FNS) building in Moscow, in several tax inspectorate offices, and in the apartment of Olga Chernichuk, FNS’ Moscow department deputy head. Reportedly, the searches are in furtherance of a criminal investigation related to a fraudulent tax refund of some $70 mln. http://www.lenta.ru/news/2011/04/06/goodmorning/ http://top.rbc.ru/society/06/04/2011/571402.shtml (video)

Russian CEO Prosecuted for Selling Trademark Abroad

Russia’s Investigation Committee brought the final version of charges against Maxim Larin, CEO of Afanasy-Pivo, a large brewery in Tver. Larin is accused of selling “Afanasy” trademarks in 1997-1999 at a nominal price to Eastern Union Holding AG, a Swiss company he allegedly controls. Since that time, some $17 mln has been paid to the Swiss company in royalties by Tver-Pivo, a Russian licensee, whose CEO, Yevgeny Kharitonkin, is also being prosecuted. Both Larin and Kharitonkin are charged with fraud and money laundering. Their defense attorneys insist that the trademark transfer was perfectly lawful and that the criminal prosecution was initiated by corporate raiders attempting to take over the company. The proceedings were originally instituted in 2002 upon the application of Aton, an investment company, which in 2002 acquired 42% of Afanasy-Pivo on behalf of Millhouse Capital, a company led by Russian tycoon Roman Abramovich.

http://www.kommersant.ru/doc.aspx?DocsID=1553494&NodesID=6

Ukrainian President Vetoes Tax Code

Ukraine’s President Viktor Yanukovich vetoed the new Tax Code recently approved by the parliament. Ukrainian entrepreneurs had protested en masse against the Code's proposed restricted application of simplified taxation methods that apply lower tax rates.

http://lenta.ru/news/2010/11/30/veto/

Video: www.24tv.com.ua

Update: Yanukovich signes Tax Code with corrections
http://lenta.ru/news/2010/12/03/kodex/

Russian Authorities Accuse Bloomberg News of Tax Evasion

Moscow's tax authorities have ordered the Bloomberg news agency to pay approximately $4 million in profit taxes for the years 2006 and 2007, but the company refuses to pay, arguing it does not maintain a permanent establishment ("postoyannoye predstavitel'stvo") in Moscow and is therefore exempt from the tax under a U.S.-Russia Tax Treaty designed to avoid double taxation. According to the Moscow Times, this is the first time a U.S. company working in Russia has been charged with tax evasion on these grounds.

http://www.themoscowtimes.com/business/article/bloomberg-office-in-profit-tax-spat/411910.html