If a foreign company sells shares (shares) of Russian organizations, more than 50% of whose assets directly or indirectly consist of real estate located in Russia, tax is withheld at source. In this case, the tax is withheld at the full rate (20%), since from 8 August 2023, all double taxation agreements with unfriendly countries have been suspended.
If the parties to the transaction are interdependent and the transaction price does not correspond to the market price, the Federal Tax Service of Russia may assess additional taxes. In this case, a transaction can be recognized as completed between interdependent persons if it is concluded with a resident of a country included by the Ministry of Finance in the list of offshore zones. By Order of the Ministry of Finance No. 86n dated 5 June 2023, the list of offshore zones was expanded from 40 to 91, and included all unfriendly countries.
It should be taken into account that only transactions between the same persons exceeding the threshold of 120 million rubles during the year are subject to price control. Since transactions for the sale of shares/shares by unfriendly persons are carried out with a mandatory discount of 50 to 99%, the transaction price may well be below 120 million rubles. However, the Federal Tax Service compares the market price of the transaction with the actual one. If, with such an adjustment, the limit of 120 million rubles is exceeded, the Federal Tax Service has the right to assess additional tax at source.
The Ministry of Finance has prepared a bill allowing the tax office to recalculate withholding tax upward. He proposes adding withholding tax to the list of taxes for which the Federal Tax Service can make additional assessments as a result of adjusting the actual price of a transaction between related parties. The difference between the market price and the actual price of the transaction is treated as dividends and is subject to withholding tax at a rate of 15%. The Russian buyer must remit the tax, deducting it from the seller’s income. Considering that, due to recent rules, companies are selling assets at a discount of more than 90%, there is a risk that a large part of the amount from the sale may go to the budget in the form of taxes. In some cases, the buyer will have to pay additional tax from his own funds, otherwise he risks being subject to fines.
Nadmitov, Ivanov and Partners Law Firm advises clients on tax issues.