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Amnesty on capital – a matter of trust


Last year’s tax reforms brought a significant amount of new restrictions and requirements for taxpayers, such as de-offshorisation measures which can be viewed as a ‘stick’ to encourage the return of capital to Russia. Shortly after the entry into force of such measures however, the Russian President offered a ‘carrot’ in the form of an amnesty on repatriated capital.

As is often the case, the Ministry of Finance immediately released a bill to the above effect. It is already being considered by the State Duma and could be adopted very soon.

Taxpayers who voluntarily declare assets previously hidden abroad, interests in CFCs and foreign bank accounts to the tax authorities will, in return, be guaranteed that all information disclosed will be subject to tax secrecy. Declarants will also be exempt from criminal, administrative and tax liability.

As is often the case, the idea in itself is not without its merits. However, its current translation into law is rather less commendable, and the question of how such an amnesty will be implemented in practice raises concerns. Besides the lack of technical accuracy, the main criticism of the text currently under discussion is that property declared under the programme will, one way or another, end up being investigated by the authorities. The reason for this is that the bill only establishes a selective amnesty depending on the offences committed. For example, the amnesty will not relieve the declarant of liability arising from the legalisation of income obtained by criminal means. As Russian criminal law defines the relevant offence in very broad terms, this leaves room for the authorities to apply it as widely and variably as they see fit in order to stretch its reach so as to include many offences relating to the manner in which the declared income was obtained.

In addition, the question of whether law-abiding taxpayers should make a declaration under the amnesty programme will inevitably arise. Taxpayers who do not declare their assets as envisaged by the bill, may be subject to enhanced scrutiny from the tax authorities – which will not come without risks and, possibly, adverse consequences.

If the bill’s vision does not evolve during the parliamentary debates, Russian tax residents will, following its adoption, face a dilemma: whether to trust the state and declare hidden assets, or adopt a ‘wait and see’ approach.


Portrait of Hayk Safaryan
Hayk Safaryan