How Relocating to Russia from Offshore Jurisdictions Helps Companies Save on Taxes

Amid sanctions and geopolitical tensions, many Russian and foreign companies previously registered in classic offshore jurisdictions (Cyprus, BVI, Netherlands) are moving to Russia’s Special Administrative Regions (SARs) — Russky Island (Primorsky Krai) and Oktyabrsky Island (Kaliningrad Oblast). This process, known as redomiciliation, allows businesses to retain control over assets, minimize tax losses, and benefit from preferential tax regimes.

Key Tax Benefits for Companies in SARs

Companies in SARs enjoy significant tax advantages:

1. Reduced corporate tax rates:

o 5% on interest and royalty income

o 0% on dividends from foreign subsidiaries (if holding at least 15% for one year)

o Full exemption from property and transport taxes

2. Protection from double taxation: SAR residents can defer Controlled Foreign Company (CFC) profit taxes until 2029

Frozen “offshore blacklist”: The list is fixed as of March 1, 2022, allowing companies from “unfriendly” jurisdictions to still qualify for benefits

3. 20-year tax stability clause for international holding companies (IHCs), ensuring unchanged tax terms

Who Has Already Relocated and What Benefits Have They Gained?

Major Russian companies have already leveraged SAR advantages:

• Yandex (moved from the Netherlands) significantly reduced its tax burden and resumed dividend payments.
• Ozon, Mother & Child Group, and HeadHunter avoided asset freezes and maintained access to international transactions.
• Rusal, VK, and United Medical Group optimized dividend and royalty taxation.

Additional benefits include:

• No currency controls in SARs, simplifying transactions with partners in Asia and BRICS countries.
• VAT exemption when reinvesting profits into Russian assets.

Relocation Requirements and Potential Challenges

To redomicile, companies must meet several conditions:

• Minimum investment of 50 million rubles in the Russian economy within a year (via capital investments or share capital contributions).
• Rent office space in SARs (legal address must be on Russky or Oktyabrsky Island).

Potential risks include:

• Sanctions-related restrictions (some banks and service providers may refuse cooperation).
• Mandatory deregistration from foreign registries within 2 years (though extensions are possible).

Future Prospects for Russia’s “Offshore Zones”

Further incentives are planned for 2025–2026:

• The Finance Ministry is considering zero dividend tax until 2026 for IHCs.
• The number of SAR residents is expected to exceed 500 by late 2025 (up from 488 today).
• Special incentives for fintech, blockchain, and biotech companies are being developed.

Relocating to Russia’s SARs offers companies 2–3 times lower taxes compared to traditional offshore zones, sanctions-proof asset protection, and continued international operations under favorable terms.

However, redomiciliation requires careful planning due to evolving regulations. To maximize benefits and minimize risks, companies are advised to consult specialized tax advisors with experience in SAR relocations.