By Andrei Skvarsky.
More Russians have been notifying Russian authorities of money in foreign banks and foreign-based businesses since Russia joined a pact on international exchanges of tax-related information, a survey shows.
However, more than one-third of rich Russians owning assets abroad still opt against declaring them, according to the returns of a joint survey by Moscow-headquartered real estate broker Tranio and London-based event organiser Adam Smith Conferences.
In 2018 Russia was due to start exchanging information with other countries as part of the Common Reporting Standard (CRS), an anti-tax evasion mechanism developed by the Organisation for Economic Co-operation and Development (OECD).
The proportion of Russian high-net-worth individuals (NHWIs) who reported foreign bank accounts to Russia’s tax service increased to about 58 per cent in 2018 from 42 per cent the year before, Tranio and Adam Smith Conferences said in a report that cited the findings of the survey.
The study involved interviewing private banking experts, lawyers and tax consultants working with NHWIs, the two firms said.
As regards foreign-based companies, 57 per cent of affluent Russians owning such firms declared them to Russian authorities in 2018. In 2017, 45 per cent of owners of such businesses reported them.
Among the HNWIs who declared their foreign bank accounts or foreign-based companies to Russian authorities, the largest proportion of 65 per cent were owners of assets of between $1m and $30m.
Russia’s programme for the tax-exempt liquidation of foreign-based companies is popular among Russian HNWIs. It is the route a little over 70 per cent of them take in trying to legalise their foreign assets.
At the same time, capital outflow from Russia remains in place, and Cyprus is the main destination – 52 per cent of respondents said their clients had been taking their money to that country.
“Business maintenance costs are low in Cyprus; the company tax rate is just 12.5%,” the report quoted Tranio managing partner George Kachmazov as saying.
“In addition, Cyprus uses English law, strongly preferred by corporate finance”, and there are “many Russian-speaking lawyers and consultants” in the country, Kachmazov said.
“Banks have always been favourably inclined towards Russian nationals, some of them are still owned by Russians.”
Switzerland and Britain are the second- and third-most preferred destinations respectively, according to the returns of the survey.
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