By Andrei Skvarsky.
The proportion of wealthy Russians who declare bank accounts held abroad to Russian tax authorities has quadrupled over a little more than a year since Russia joined a multinational accord on the automatic exchange of financial information, surveys suggest.
Only about 10 per cent of Russian high net worth individuals (HNWIs) having bank accounts abroad had reported them at home before Russia signed the Multilateral Competent Authority Agreement (MCAA) in January 2017.
But the proportion surged to about 40 per cent after Russia joined the MCAA, which is a mechanism to facilitate compliance with the Common Reporting Standard (CRS), an information exchange standard evolved by the Organisation for Economic Co-operation and Development (OECD), real estate company Tranio said in an end-of-January report on a survey that it had carried out jointly with business event organiser Adam Smith Conferences.
The two companies questioned 60 banking professionals in the survey.
A survey done by them several months ago showed the same percentages of declarers and non-declarers before and after Russia’s signature of the MCAA, even though Russia plans its first information exchange under the agreement for September 2018.
Wealthier HNWIs are more likely to declare their accounts than less wealthy ones but there have been more account disclosures in the latter category as well, the latter survey suggests.
However, many HNWIs still find ways to evade Russian taxes.
Change of tax residency, for instance obtaining permanent residency or citizenship in a foreign country by making large investments in its economy, is the commonest tactic, according to 78 per cent of respondents in the latter survey.
Other ways of tax evasion are to nominally transfer accounts to relatives, friends or lawyers, or to move them to non-MCAA jurisdictions, including the United Arab Emirates. But this is more frequent among “poorer” HNWIs.
As for change of tax residency, wealthier HNWIs are more likely to opt for Cyprus or Britain, and sometimes the United States, and less wealthy ones for Hungary.
Monaco and Switzerland are popular among owners of fortunes of more than $5m. Owners of fortunes exceeding $30m usually prefer Malta, according to the returns of the survey.
Dodging tax on shares in foreign companies is also practised among Russians, according to the report.
A Russian only has to pay tax on interest in a company registered abroad if their stake makes up 25 or more per cent of the company’s total capital, or 10 or more per cent if the company has other Russian owners.
So ownership of stakes bigger than those is often transferred wholly or partially to a nominal owner, the report said.
By January 15, 2018, 98 countries had signed the MCAA, according to the OECD.
Tranio is headquartered in Moscow and has offices in Bryansk, Russia, in Spain and in Germany. Adam Smith Conferences, which specialises in organising conferences in Russia and other former Soviet republics, has offices in London and Moscow.
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