On 5 November 2019, the Russian Ministry of Finance (MOF) issued the letter No. 03-03-06 / 1/85022 concerning the profits of controlled foreign companies (CFC) in cases where a controlling person has an indirect participation in a CFC through legal entities that are also controlling persons of that CFC and are recognized as Russian tax residents.
The letter remarks article 25.15, paragraph 4 of the Russian Tax Code which provides that if the controlling person has an indirect participation in a CFC through legal entities that are also controlling persons of that CFC and are recognized as Russian tax residents, the profits of the CFC included in the taxable base of the controlling person that is indirectly participating in the CFC will be reduced by the amount of the CFC’s profits included in the taxable base of other controlling persons. The profits will be reduced in proportion to the participation share of the controlling person in the legal entities through which the indirect participation in the CFC is realized.
The letter also clarifies that, in the event that the resulting amount of CFC profit to be included in the first-mentioned taxpayer’s tax base is zero, then the taxpayer is not required to include this result or information on the CFC in their corporate tax return for tax on profit of organizations
