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Question: On the accounting of dividends paid in determining the profit of CFC.

Answer:

The Department of Tax and Customs Policy in addition to the letter dated 26.10.2016 N 03-12-11/2/62523 on the accounting treatment of dividends paid in determining the profits of a controlled foreign company for the purpose of applying the criteria established by clause 7 of article 25.15 of the Tax Code of the Russian Federation (further - Code), reports the following.

According to clause 1 of Article 25.15 of the Code, the profit (loss) of a controlled foreign company is recognized as the amount of profit (loss) of this company, calculated in accordance with Article 309.1 of the Code.

At the same time, such profit is to be decreased by the amount of dividends paid by this foreign company in the calendar year following the year for which financial statements are prepared in accordance with the personal law of such company, taking into account the interim dividends paid during the financial year for which these financial statements are prepared taking into account the particulars provided for in Article 309.1 of the Code.

Sub-clause 1 of clause 1 of Article 309.1 of the Code recognizes a profit (loss) of a controlled foreign company as a profit (loss) determined according to its financial statements, compiled in accordance with the personal law of such a company for the financial year. In this regard, in the case established by the said subparagraph, the profit (loss) of the controlled foreign company is recognized as the amount of profit (loss) of this company before tax.

According to the Department, the profit (loss) of a controlled foreign company is recognized as the amount of profit (loss) of this company before tax according to its unconsolidated financial statements, adjusted for the income (expenses) of this company referred to in clauses 3 and 3.1 of Article 309.1 of the Code for the period for which, in accordance with the personal law of such a company, such financial statements are prepared for the financial year.

Therefore, according to the Department, the thresholds established by clause 7 of Article 25.15 of the Code, and the corresponding transitional provisions apply to the profit of a controlled foreign company, determined in accordance with the Code, without considering its reduction by the amount of dividends (distributed profits) paid by such controlled foreign company.

As for the rule established by the first paragraph of clause 2 of Article 309.1 of the Code, the procedure for recalculating into rubles the profit (loss) of a controlled foreign company determined according to the financial statements of this company and specified in foreign currency reduced by the amount of dividends (distributed profit), said rule refers to the procedure for calculating the tax base for the tax on profits of a controlled foreign company, and not to determining the amount of its profit (loss) for the purposes of comparison with threshold values established clause 7 of Article 25.15 of the Code.

This letter does not contain legal regulations, does not specify regulations and is not a regulatory legal act. Written explanations of the Ministry of Finance of Russia on the application of the legislation of the Russian Federation on taxes and fees are informational and explanatory in nature and do not prevent taxpayers from being guided by rules of the legislation of the Russian Federation on taxes and fees in an understanding different from the interpretation given in this letter.

31 March 2017