Compare tax costs of liquidating vs selling a Russian subsidiary in 2025–2026. Withholding rates, approval requirements, timeline and which option saves more.
The choice: two paths out of Russia
Liquidation: the tax mechanics
Sale: the tax mechanics
Side-by-side comparison
Which to choose: decision framework
Foreign companies winding down their Russian operations face a fundamental choice: liquidate the subsidiary or sell it. The financial, tax and procedural implications of each path differ significantly — and the right answer depends on the company's specific structure, the buyer market, and the applicable double tax treaty.
Since 2022, the process has become more complex. Sales by companies from "unfriendly" countries require Government Commission approval and are subject to mandatory discounts. Liquidation has its own set of procedural requirements and withholding tax implications.
This article focuses on the tax comparison. Regulatory and legal aspects are covered in our guide to exiting Russia for unfriendly-country companies.
When a Russian LLC is liquidated, the sequence of events from a tax perspective is:
All liabilities are settled (taxes, creditors, employees)
Remaining assets are distributed to the shareholder
The distributed amount in excess of the shareholder's original contribution is treated as dividend income for Russian withholding tax purposes
The withholding tax rate on the liquidation distribution depends on the shareholder's jurisdiction:
Liquidation typically takes 3–6 months from the decision to the final distribution. The process includes a 2-month creditor notification period, tax audit by the Federal Tax Service, and deregistration from all state registers.
When a foreign company sells shares in a Russian LLC, the Russian buyer withholds tax on the gain (sale price minus documented acquisition cost). The applicable rate:
Most DTT jurisdictions (active treaties): Capital gains on shares are typically taxable only in the seller's country. Russia does not withhold. The seller pays tax at home.
Unfriendly countries (suspended DTTs): Russia applies 20% withholding on the gain
Real estate holding companies: Russia retains taxing rights regardless of DTT (if >50% of assets is Russian real estate)
For companies from "unfriendly" jurisdictions, the sale also requires:
Government Commission approval (Sub-Commission on Foreign Investments)
Mandatory price discount of at least 50% to market value
Voluntary contribution to the Russian federal budget of at least 35% of the transaction value at market price
This combination — 50% price discount plus 35% budget contribution — significantly reduces the net proceeds from a sale for EU, US, UK and other "unfriendly" sellers.
Illustrative example: Russian subsidiary with net assets of RUB 100M, original investment of RUB 20M, shareholder from Germany (DTT suspended).
In this example, liquidation is significantly more favourable for a German shareholder. The mandatory discount and budget contribution rules introduced for "unfriendly" sellers make voluntary exit by sale economically painful.
For Chinese, Turkish or UAE shareholders, the calculation is different — sale proceeds are not discounted and the DTT protects against Russian capital gains tax. In that case, sale may be preferable if a willing buyer can be found at a good price.
There is no universal answer, but the following framework helps:
Related service: Company registration →Practical support for international business in Russia.