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Who becomes a controlling person. A Russian tax resident whose interest in a foreign company exceeds the threshold, alone or together with a spouse and minor children, or anyone who in practice controls the company through other mechanisms, even without a formal stake.
Two notices, not one. The notice of participation in foreign organisations and the notice of controlled foreign companies are different documents with different deadlines and different fines for non-filing. Confusion between them is the main source of errors among owners of foreign structures.
Why the state cares. The CFC rules do not allow profit to be accumulated indefinitely in a low-tax jurisdiction without being taxed at the ultimate Russian beneficiary, which is why the duty to report does not depend on whether dividends were paid.
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Two notices, and they are not the same thing
Notice of participation. Filed within three months of the date the ground arose: a stake was acquired, a trust management structure was established or control was otherwise established. A one-off action for each change in the stake, not an annual duty.
CFC notice. Filed annually: by legal entities no later than 20 March, by individuals no later than 30 April, together with the personal income tax return. The duty continues for as long as control continues, regardless of the amount of the company’s profit.
Why they are confused. Owners often file the notice of participation when buying a company and consider the matter closed. But this does not remove the annual CFC notice, which must be filed separately and again every year.
Fines for each breach
RUB 500,000 for a CFC. Failure to file the CFC notice or including false information in it carries a fine of this amount for each controlled company, not one general fine for all.
RUB 50,000 for participation. A separate fine applies for failing to file, or filing late, the notification of participation in a foreign organisation, again for each structure.
Fines are cumulative. The offences are independent: missing both notifications for the same company means incurring both fines at once, not one of the inspectorate’s choosing.
A late voluntary filing, made before the inspectorate has identified the breach, generally reduces the consequences. This is a case where cooperating is cheaper than waiting for a demand.
When a CFC’s profit is exempt from tax
An active company. If the share of passive income (dividends, interest, royalties) in a CFC’s total revenue is below the statutory threshold, the profit may be exempt from taxation in the hands of the controlling person.
Sufficient taxation in the CFC’s jurisdiction. The exemption is available if the CFC’s effective tax rate in its own jurisdiction is not lower than a set proportion of the weighted average Russian rate. Structures in zero-tax or nominal-tax jurisdictions usually fall outside it.
A double taxation treaty. The CFC’s jurisdiction must exchange tax information with Russia. Without a treaty in force the exemption generally does not apply, even if the company is genuinely active.
A CFC notification must be filed in every case, even where the profit is fully exempt from tax. The exemption removes the tax burden, but not the duty to report.
CFCs in multi-jurisdiction structures
Cascading structures. If a first-tier CFC owns another foreign company, the notification duty extends to the second tier. It cannot be skipped just because the link to the Russian resident is indirect.
The link to currency control. The CFC’s own accounts abroad are a separate matter of regulation: CFC reporting records the fact of control, while the duties attached to the controlling individual’s accounts are governed independently in Russia.
Changing residency does not close past periods. If the controlling person was a Russian tax resident for even part of the year, the notification duty for that period remains after residency changes. This is a common mistake on relocation.
Key figures
Experience in CFC reporting and the disputes arising from it, not a general overview of international taxation.
Common mistakes by controlling persons
Assuming zero profit removes the duty. A CFC notification is filed regardless of the amount of profit, and even where the company makes a loss. The duty depends on control status, not on financial result.
Failing to add up relatives’ shares. The share of a spouse and minor children is added to the person’s own when deciding whether control exists. A formal 24% on paper easily becomes a controlling stake once the family is counted.
Forgetting the second and third tiers. A notification is filed for every controlled company in the chain, not only the one that holds the asset directly.
Confusing tax exemption with exemption from reporting. Even fully tax-exempt CFC profit does not cancel the duty to file a notification. These are two separate, unrelated reliefs.
Frequently asked questions
Must a CFC notification be filed if the company made no profit?+
Yes. The duty to file a CFC notification does not depend on the amount of profit. It is determined by the controlling person’s status.
What happens if both notifications are missed?+
Fines for each ground are charged independently and added together: RUB 500,000 for the CFC and RUB 50,000 for the notification of participation, in respect of the same company.
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