CFC (КИК) reporting has a trap that catches people out — the notification is owed even when the foreign company made no profit. Whether you're caught, whether last year's un-filed notification is a problem, and whether the lump-sum election saves you money are the questions.
You're a controlling person of a foreign company — including de-facto control below 25% — and the annual notification is owed regardless of profit.
Elect the fixed lump-sum regime if it beats actual-profit reporting for your situation — a modelling question worth running.
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.
A foreign entity is a CFC where a Russian tax resident is a "controlling person." A controlling person is defined as:
An individual or legal entity with a direct or indirect participation interest of more than 25% in the foreign entity
An individual or legal entity with a direct or indirect participation interest of more than 10%, where Russian tax residents together hold more than 50% of the foreign entity
A person who exercises de facto control over the foreign entity — regardless of formal ownership percentage. This covers situations where a person has real influence over the entity's decisions even without formal majority ownership
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.
There are two separate obligations — the notification (уведомление) and the profit reporting (отчётность о прибыли КИК). Both must be filed, but under different conditions.
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:
Pick your situation — we'll tell you where you stand:
Name and jurisdiction of the foreign entity
Registration number and address
The percentage of participation and the basis of control
Description of how the participation is structured
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.
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:
Covers all CFCs of that individual — regardless of how many there are or how profitable they are
Eliminates the obligation to calculate CFC profit under Russian tax rules
Eliminates the obligation to file supporting documentation for CFC profit
Does not eliminate the notification obligation — the notification must still be filed
Must be elected by filing a specific form with the FTS — it is not automatic
Once elected, it applies for all subsequent years until the individual opts out
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.
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:
Active business exemption — CFC profit is exempt if the CFC is an "active foreign company" — i.e. passive income (dividends, interest, royalties, capital gains) represents less than 20% of its total income
Yes — this is the trap. The annual CFC notification is owed whenever you're a controlling person, regardless of whether the company made any profit. Missing it generates penalties even at zero profit, so the notification is the obligation to watch, separate from any tax.
If you're a Russian tax resident controlling a foreign company, likely yes — the CFC rules reach controlling persons, and relocation while keeping the company is a common trigger. Checking your position, including whether de-facto control below 25% applies, is worth doing before a notification is missed.
It depends — the fixed lump-sum can beat actual-profit reporting for some, but not all. Modelling it against your situation is what avoids overpaying under either route.
This explains КИК reporting — and the trap that the notification is owed even with no profit. Your question is whether you're caught, whether last year's un-filed notification is a problem, and whether the lump-sum election would save you money.
Relocated and kept a foreign company? The notification may be owed even with zero profit — worth checking before it's a penalty.
Practical support for international business in Russia.