CFC Reporting for Russian Tax Residents

A practical guide to CFC (Controlled Foreign Company) reporting in Russia — who must file, what must be disclosed, how profit is taxed, exemptions, the…

Russia's Controlled Foreign Company (CFC) rules — known in Russian as КИК (Контролируемые иностранные компании) — have been in force since 2015 as part of Russia's "de-offshorisation" programme. They require Russian tax residents — both individuals and companies — who own or control foreign entities to disclose those interests and, in most cases, to pay Russian tax on the undistributed profits of those foreign entities.

The rules are complex and frequently misunderstood. Many Russian tax residents who relocated abroad after 2022 and retained foreign company ownership still have Russian CFC obligations if they remained Russian tax residents. Many who have moved to the UAE or Turkey — and own companies there — now have new planning options following the UAE's removal from the offshore list and the new Russia-UAE tax treaty. This guide explains the essentials.

Who is a controlling person

A foreign entity is a CFC where a Russian tax resident is a "controlling person." A controlling person is defined as:

The rules apply to foreign companies, partnerships, trusts, foundations and other structures. Foreign trusts with Russian-resident settlors or beneficiaries are also covered. Spouses and minor children's interests are aggregated with those of the controlling person.

The de facto control concept means that CFC rules can apply even where a Russian resident holds less than 25% of a foreign entity. If they exercise control — through contractual arrangements, shareholder agreements, or informal influence — the entity may still be treated as their CFC. This is particularly relevant for family structures where formal ownership is spread among family members.

Reporting obligations

There are two separate obligations — the notification (уведомление) and the profit reporting (отчётность о прибыли КИК). Both must be filed, but under different conditions.

The notification — always required

Any Russian tax resident who owns or controls a foreign entity must file an annual notification with the FTS. This is required regardless of whether the CFC has profit, regardless of whether the profit exceeds the exempt threshold, and regardless of whether the entity is active or dormant. The notification must include:

Profit reporting — when profit exceeds RUB 10 million

Where the CFC's profit calculated under Russian tax rules exceeds RUB 10 million in a year, the controlling person must include that profit in their Russian tax base. For individuals this means including it in the Form 3-NDFL personal income tax declaration. For companies it means including it in the corporate income tax calculation.

The profit is calculated using either the CFC's statutory financial statements (if the CFC is in a treaty jurisdiction with tax information exchange) or using Russian tax accounting rules. The calculation can be complex and requires professional assistance.

The lump-sum option for individuals

Russian individual tax residents can elect to pay a fixed annual "lump-sum" payment of RUB 5 million per year in lieu of calculating and reporting actual CFC profit. This election:

At the 13% PIT rate, RUB 5 million of lump-sum tax corresponds to approximately RUB 38.5 million of CFC profit — the point at which paying the lump sum becomes more expensive than paying actual tax. If your CFCs generate less than RUB 38.5 million of profit per year, the lump-sum is likely more expensive than calculating actual profit. If they generate more, the lump-sum is cheaper and also eliminates the documentation burden. The lump-sum is most attractive for individuals with multiple profitable CFCs where the documentation burden alone justifies the flat payment.

Exemptions from profit taxation

Even where a CFC has taxable profit above RUB 10 million, that profit may be exempt from Russian tax in certain circumstances. The main exemptions: