Deoffshorization is ... Measures to deoffshorization of the Russian economy

Today we will analyze a fairly young, but very popular term that hides a whole range of government measures. This is deoffshorization. Imagine the interpretation of the concept, legislative acts confirming this process. Consider what offshores are, why they are undesirable for the state economy.

Definition of a concept

Deoffshorization is a set of measures aimed at eliminating or reducing the involvement of residents of the Russian Federation acting in the guise of foreigners (or using foreign law) in order to illegally evade taxes. Such events are held in various fields - legislative, law enforcement and information.

And this is not the only formulation of the concept. Its unified characteristics do not yet exist. Also deoffshorization is:

Fighting offshore companies themselves, as well as tightening control over operations that take place in offshore zones.
A set of measures to "improve" the business in the framework of state policy.
One of the factors in the development of the economy that facilitates honest business.

Deoffshorization is a term that has been used relatively recently in the Russian economy since 2013. Government events, called this concept, are designed to impose bans on the use of offshore and foreign companies by residents of the Russian Federation.

What is offshore?

In order to fully understand the meaning of the concept with which we will operate, you need to clearly understand the meaning of the word "offshore". What is simple language?

The term comes from English. offshore - offshore. These are financial centers that attract foreign capital by tax and administrative benefits. An offshore can be a certain zone or a whole country. The second popular name is "financial paradise." So there are a lot of their zones in the world today - about 50.

About 10% of financial savings on the planet are concentrated in offshore zones. If we go to specific numbers, then about 32 trillion dollars. And this exceeds the combined GDP of the two most developed countries in the world - Japan and the United States.

Offshore. What is simple language? An offshore company is a company that is registered by a foreign entrepreneur in an area with a favorable tax climate.

It is a mistake to consider offshore companies illegal. But the fact that they are widely used for various economic crimes cannot be denied. Something like this: the use of economic fraudulent schemes, criminal money laundering. This practice is also popular: government officials register offshore companies to whom the law prohibits doing business. A striking example of such a violation is the loud Panama Dossier.

Offshore companies are different

It is also important to clearly distinguish between the main types of offshore:

Full offshore. Areas where companies are completely exempt from reporting. The percentage of income taxes here is incredibly low. Or, entrepreneurs simply pay a fixed amount. Somewhere at all, a businessman can be completely exempt from paying taxes. These zones include the Seychelles, Cyprus, Dominica, the British Virgin Islands, Belize, Nevis, the Federation of Saint Kitts.
Offshore tax area. It introduces reduced tax rates. However, companies are not exempt from accounting for their activities, filing tax reports. Similar zones today are considered Panama, Hong Kong, Scotland.
"Tax Oases".A certain limited offshore territory within a state.

Today, the Virgin Islands are considered the most popular offshore in the world. The zone attracts businessmen by the simplicity of both registration and business, the absence of tax payments. In addition, the entrepreneur is guaranteed complete confidentiality of his personal data: on financial transactions carried out, personality, profit.

Legal use

Deoffshorization of the economy in the Russian Federation does not at all mean a complete ban on the registration by Russian entrepreneurs of firms in foreign countries. The following legal uses of offshore are allowed:

Creation of joint companies with foreign partners.
Protection of the rights of businessmen in a more developed legal system, with the use of financial instruments that are not yet available in the Russian Federation.
Creation of special mechanisms providing asset protection and property inheritance.
Carrying out charity activities and so on.

Illegal use

At the same time, the Russian state is actively fighting the abuse of offshore companies. It is illegal to use them for the following purposes:

Legalization of funds obtained by criminal means.
Tax avoidance.
The accumulation of non-taxable profits outside the territory of the Russian Federation.
Raiding, the use of fraudulent schemes for money laundering, etc.

The law on deoffshorization, therefore, does not abolish the use of offshore companies - it does not matter where the businessman registered the company. It is important that his firm does not shy away from paying taxes.

The main tasks of deoffshorization

To solve this problem, the Russian government introduces the following measures to deoffshorize the Russian economy:

Ensuring enhanced transparency of offshore companies.
Identification of real beneficiaries. That is, citizens who in fact are owners of assets, business entities and other valuables registered in offshore zones for dummies.
Improving international fiscal cooperation.
Determining the true reasons that encourage Russian entrepreneurs to register their business in offshore zones.
Elimination (or minimization) of the influence of these reasons on domestic business.
Stimulating the return of businessmen from offshore companies to the territory of the Russian Federation.

Reasons to go offshore

For the results of the deoffshorization to be effective, the Government needs to clearly know what prompted businessmen to register the company in an offshore zone, and not in the Russian Federation.

Today, economists identify the following main reasons:

Imperfection of the legislation of the Russian Federation.
Unfavorable climate for attracting foreign investment.
Undeveloped stock market.
Ineffective judicial system.
Difficult conditions for active business.

Theoretical Elimination

In theory, to eliminate the above reasons, the government of the Russian Federation needs to do the following:

Implement the principles of legal states within the Russian Federation.
Respect the legal freedoms and rights of their citizens.
Strengthen the democratic institutions of society.
Eradicate corruption and bureaucracy.
To create favorable conditions for registration and subsequent business in the Russian Federation. For example, to eliminate the excessive interference of the bureaucracy in the economy.

For the direct implementation of these tendencies of deoffshorization, a whole range of normative and legal acts has been adopted.

Normative documents of the Russian Federation

In the Russian Federation today, a number of regulations have been introduced that are directly related to the deoffshorization of business:

Decree of the President of the Russian Federation "On Long-Term Economic State Policy" (05/07/2012). In this act, the head of state instructed the Government to implement measures to ensure transparency in the financial activities of business entities.This includes countering tax evasion in the Russian Federation by creating offshore and one-day companies.
Message to the Federal Assembly of the President of the Russian Federation (12.12.2012). In the document, the head of state formulated the need to develop comprehensive, interrelated measures for the deoffshorization of the Russian economy.
Black lists of offshore zones compiled and controlled by the Federal Tax Service, the Ministry of Finance, and the Central Bank.
Federal Law No. 376 (adopted in 2014, amended in 2015, 2016) "On taxation of foreign controlled companies and the income of foreign firms." It is considered the first anti-offshore law in the Russian Federation.
Federal Law No. 115 "On Countering the Laundering of Criminal Profits" (2001).
Federal Law No. 140 "On the voluntary declaration of assets and accounts in banking organizations" (2015).
Federal Law No. 44 "Contractual Public Procurement System" (2013).
The program for deoffshorization of the domestic economy "Enhancing the attractiveness for Russian business of domestic jurisdiction."

We will now get acquainted with the main legislative act from the list.

Anti-offshore law

The main decision of the Government on deoffshorization is the adoption of Federal Law No. 376, which introduced significant changes to the Tax Code in 2014. The document is also called the anti-offshorization law.

If you summarize the content of this normative act, you can fit in two theses:

The profit that Russian residents receive in offshore companies should be taxed under domestic law.
Notification of the tax service on the participation (direct or indirect) of Russian individuals or legal entities in foreign companies. As well as the subsequent declaration of their profits according to the participation interest.

In addition, Federal Law No. 376 (2014) introduced into the Tax Code a number of previously unused concepts: “controlling persons”, CFC (“controlled foreign company”), “actual recipient of profit”, etc.

Change of law

Federal Law No. 150 (2015) and Federal Law No. 32 (2016) introduced the following amendments to the main Russian deoffshore law:

The deadline for filing a notice on participation in a foreign company (or on termination of such participation) has been increased from 1 to 3 months.
The fact of receipt of income is not recognized if it is received as a result of the transfer of competencies for profit between members of the same family (applies to foreign legal entities).
Taxation in the event of the sale of securities that a controlling person acquired from its controlled firm.
Conditions for exempting profits of controlled foreign companies from taxation in the Russian Federation.
Specification of the circle of interrelated persons.
Mandatory control of all foreign trade operations with offshore companies, the size of which exceeds 60 million rubles per year.
The introduction of sanctions for the registration of firms through nominees.
Establishment of liability for the use of illegal identification documents when registering a one-day company.

Offshore companies themselves are not criminal. But many unscrupulous businessmen use them for money laundering, tax evasion. Against such entrepreneurs and directed deoffshorization in the Russian Federation.