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Question: On recognition of a person as the controlling person of a foreign organization (a structure without a legal entity) with automatic exchange of financial information with foreign states (territories).

Answer:

The Department of Tax and Customs Policy considered the query dated February 5, 2019 and reports the following. In accordance with paragraph 2 of Article 25.13 of the Tax Code of the Russian Federation (hereinafter - the Code), under the controlled foreign companies for the purposes of the Code there are recognized, along with foreign organizations, the foreign entities without forming a legal person, the controlling person of which is an organization and (or) an individual recognized as tax residents of the Russian Federation.

A person recognized as a tax resident of the Russian Federation is recognized as the controlling person of a foreign structure without forming a legal person on the grounds provided for by clauses 9, 10 or 12 of Article 25.13 of the Code.

Clause 12 of Article 25.13 of the Code establishes that under the controlling person of a foreign structure without forming a legal person for the purposes of the Code there is also recognized another person who is not its founder (founder), if such person exert control over this structure and at the same time with regard to such person there is met at least one of the following conditions:

1) such a person has the actual right to income (its part) obtained by such a structure;

2) such person has the right to dispose of the property of such a structure;

3) such a person is entitled to receive the property of such a structure in case of its termination (liquidation, termination of the contract).

On the basis of clause 8 of Article 25.13 of the Code, under the control over a foreign structure without forming a legal person for the purpose of the Code there is recognized the rendering or having a decisive influence on decisions taken by the person managing the assets of such a structure in relation to the distribution of the received profit (income) after tax in accordance with personal law and (or) constituent documents of this structure.

In addition, we draw attention to the fact that a person recognized as a tax resident of the Russian Federation has the right to independently recognize himself as the controlling person of a foreign structure without forming a legal person in the manner established by clause 13 of article 25.13 of the Code.

At the same time, we note that for the purposes of the Code in accordance with clause 7 of Article 142.1 of the Code, when executing automatic exchange of financial information with foreign states (territories), a person who directly or indirectly controls a client is an individual who ultimately, directly or indirectly (through third parties) persons) owns (has a predominant participation of more than 25 percent in the capital) client or has the ability to control the actions of the client.

At the same time, the term “person directly or indirectly controlling a client (beneficiary)” should be used in accordance with the recommendations of the FATF (Financial Action Task Force on Money Laundering).

At the same time, we note that since, based on the question posed in the query, when performing automatic exchange of financial information, information is collected in the territory of a foreign state (territory), then to recognize a person who directly or indirectly controls a client, you should be guided by the legislation of a foreign state ( territory).

In accordance with paragraph 3 of Article 142.3 of the Code, the federal executive body authorized to monitor and supervise taxes and fees, and territorial tax authorities are entitled to use financial information of financial market organizations and competent authorities of foreign states (territories) obtained in accordance with Chapter 20.1 of the Code, in the exercise of its powers in accordance with the legislation of the Russian Federation on taxes and fees.

Clause 8 of Article 25.14 of the Code provides that if the tax authority has information, including information received from the competent authorities of foreign states, indicating that the taxpayer is the controlling person of the foreign organization (foreign structure without forming a legal person), but at the same time such taxpayer did not send to the tax authority the notification stipulated by paragraph 6 of Article 25.14 of the Code, in cases specified in Article 25.13 of the Code, the tax authority sends a request to this taxpayer to submit the notification provided for in paragraph 6 of Article 25.14 of the Code, within the prescribed time limit specified by the tax authority, which may not be less than thirty days from the date of receipt of said request.

Thus, the information obtained can be used by tax authorities to exercise their powers within the framework of the legislation.

However, it should be noted that for the purposes of taxation of profits of a controlled foreign company, recognition of a person as a controlling person is carried out on the basis of the provisions of article 25.13 of the Code. There are no other grounds for recognizing a person as a controlling person.

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 the rules of the legislation of the Russian Federation on taxes and fees in an understanding different from the interpretation given in this letter.

03/01/2019