Controlled Foreign Companies (CFCs) in Russia: What’s Important to Remember Before Moving to Cyprus

Controlled Foreign Companies (CFCs) in Russia: What’s Important to Remember Before Moving to Cyprus

Moving to Cyprus does not automatically relieve you from tax obligations in Russia, especially if you still retain your Russian tax residency. One of the most sensitive issues is reporting on CFCs (Controlled Foreign Companies). Missing deadlines or procedural requirements can lead to significant fines and risks.

Even when planning to change your tax residency, it’s important to fulfill all obligations in Russia correctly and on time — this minimizes risks and ensures a “clean exit” when later deoffshoring assets.

What is a CFC and Who Must Report

A Controlled Foreign Company is a legal entity registered outside of Russia but controlled by a Russian tax resident (individual or legal entity). Control means:

•       Direct or indirect ownership of more than 25%,
•       Or joint ownership of over 50% with other Russian residents.

Even if the foreign company is inactive, its mere control requires notification and reporting.

Deadlines for CFC Notifications and Reporting in 2025 (for 2024)

In 2025, the following deadlines apply for controlling individuals:

•       CFC Notification: by April 30, 2025 — includes company name, jurisdiction, ownership share, and type of control.
•       CFC Profit Reporting: by April 30, 2025 — submitted with the 3-NDFL declaration, if the CFC has taxable profit.

CFC notification is required in the following cases as well:

•       If the CFC’s profit calculated under Russian tax law does not exceed 10 million rubles — the profit is tax-exempt in Russia and does not need to be included in the tax base, but the notification is still mandatory.
•       If the CFC has a loss or zero profit for tax purposes.
•       If the CFC is located in an EAEU country — the profit is exempt in Russia, but the CFC notification must still be submitted.

Fines and Consequences for Missing Deadlines

The risks for late or incomplete reporting are significant:

•       500,000 RUB — for not submitting CFC profit reports per company;
•       Up to 500,000 RUB per CFC — for failing to submit CFC notifications or providing false data;
•       20% of the tax amount — for hiding CFC profit in the declaration;
•       In case of intentional concealment — criminal liability risks and a 40% penalty.

Tax authorities actively exchange information under CRS and BEPS frameworks, making it easier than ever to discover “hidden” CFCs.

How to Properly Prepare for Relocation and Maintain Tax Cleanliness

While you retain Russian tax residency, you must:

•       Audit your ownership structure and the role of your CFCs in your business;
•       Submit all required CFC notifications and financial reports, if necessary;
•       Ensure your CFC has audited financial statements in English or Russian — this is a mandatory requirement;
•       Consider obtaining Cyprus tax residency in advance to stop your obligation to report and declare CFC profits in the following period.

Key Takeaways for Controlling Persons

•       You must notify about your CFC, even if it is inactive.
•       Submission deadline: April 30, 2025 (for 2024).
•       Penalties are substantial — better to prepare in advance than deal with consequences later.

If you’re preparing to move to Cyprus and want to build a sound tax strategy, the Main Partner Trust team can help diagnose your situation, close obligations in Russia, and transition to Cyprus residency without tax risks.

Contact us to learn how to reduce your IP-related tax burden while maintaining full compliance.

Remark: The content of this article was accurate at the time of the first publication. It provides general information on the subject matter and is not intended as legal advice. For specific advice on your situation, we recommend seeking professional counsel. If you have any questions or need further information, please contact our experts at contact@mainpartner.com.

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