Definition of a controlled foreign company (CFC):
- a company that is not recognized as a tax resident of the Russian Federation, the controlling person of which is a company and (or) an individual who is recognized as a tax resident of the Russian Federation;
- a foreign structure without the formation of a legal entity, the controlling person of which is a company and (or) an individual recognized as tax resident of the Russian Federation.
Definition of a controlling entity of a CFC:
Individuals or legal entities recognized as tax residents of the Russian Federation, and:
- having an interest in a foreign organization of a specified size or;
- exercising control over a foreign organization.
Controlling person of CFC by participation criteria:
- the share of direct or indirect participation in the organization is more than 25%;
- the share of direct or indirect participation in an organization is more than 10% if the share of participation of all persons recognized as tax residents of the Russian Federation in this organization is more than 50%.
CFC notification is submitted by:
- Taxpayers-companies – no later than March 20 of the year following the tax period in which the controlling person recognizes income in the form of CFC profit;
- Taxpayers-individuals – no later than April 30 of the year following the tax period in which the controlling person recognizes income in the form of CFC profit.
How can CFC notification be submitted to the tax authority:
- by taxpayers in accordance with the established forms (formats) in electronic form;
- taxpayers-individuals have the right to submit these notifications in hard copy.
Should incomplete information, inaccuracies or mistakes be found in the submitted CFC notification, a taxpayer has the right to submit an updated notification.
The following documents should be attached to the notification:
- CFC’s financial statements for the financial year, prepared in accordance with its personal law. If it is not possible to submit such reports, the individual has the right to submit other documents confirming the CFC’s profit;
- an audit report on the financial statements of a CFC, if the audit of such a company is mandatory or conducted voluntarily.
Failure to submit a CFC notification as well as documents confirming the amount of the CFC’s profit (loss) within the prescribed period shall result in a fine of 500,000 rubles.