Russian oligarchs buy Maltese citizenship out of fear and saving

From 1 January 2018 beginning of a global automatic exchange of data on Bank accounts among countries of the Organization for economic cooperation and development (OECD). Russia and other States joined the regime after the Panama scandal offshore in the hope of out of the hidden income of the business and to prevent tax fraud on a large scale. Russian oligarchs panicked: all of last year’s wealthy citizens actively change tax residency, and recently it became known that several prominent businessmen and dozens of unremarkable multimillionaires become citizens of Malta, paying a lot of money. Apparently, the domestic business escapes from the tax system of Russia, however, as experts believe, not only for concealment of income.

photo: Alex geldings

According to several European companies, specializing in services for changing tax residency, the demand for professional management of the transition of the business under foreign jurisdiction in 2017 has reached a historical peak. The most popular countries to change the tax residency of the Russians, Israel, the UK, Cyprus, Monaco and Malta. By the way, according to the government of the latter country and its citizens over the last three years were more than 730 people with infamous names in Russian and huge States. For example, in the lists of domestic regulars list “Forbes” Arkady Volozh, Boris mints, Alexander Nesis and members of their families.

A Maltese passport, not losing the Russian, these people received a lot of money (although in this business is probably spending) is $1 million, and quite legally, in the framework of the government program “the Malta Citizenship by investment”. In such original way the island nation distance money in your budget (total expected inflows of €1 billion). In return, the newly-made citizens get the opportunity to stay in a warm country, visa-free travel to most countries in the world, and if you want to pay taxes to the local tax system, but not in Russia. However, to become a tax resident of Malta, you have to live there 183 days a year.

In Cyprus, for example, there are more than loyal to the regime shift of jurisdiction. It must be in the country for only 60 days. In addition, in some cases, the Cypriot taxpayer may not have to pay taxes on the income of individuals for 17 years. In turn, in Monaco there are no income tax for residents, as in UAE, where registration of residence is enough to open a company in the country and cross the border at least twice a year. For the oligarchs the state just Paradise, a solid break: tax and year-round summer.

“Russian businessmen, moved to a foreign jurisdiction, can do to save a lot on tax. In the same Cyprus is no tax on dividend remuneration. Having attended to in advance, with this sauce you can “hide” almost any income”, — told “MK” a senior analyst “Alpari” Anna Bodrov. However, according to her, businesses hide their income not only because I don’t want to share. In the end, Russia is not the highest rate of tax on income of physical persons — 13%. Peak flight in a foreign jurisdiction that occurred in 2017 and ongoing, can be associated with the onset of agreements on the exchange of tax information with OECD. According to Bodrova, Russian businessmen are simply afraid that information will leak “into the wrong hands”, and a change of tax residence will allow you to hide data, in particular, on Bank accounts abroad.

“Many fear that the tax information exchange will allow the Russian side to disclose the “extra” data, which later will interfere with doing business with international partners. For example, in time, leaked information about the funds in foreign accounts, offshore could hurt business, carry reputational risks and the risk of failure of transactions. In addition, the business reasonably doubt the high level of confidentiality of the received information by the Russian side,” — says the analyst. As the expert concludes, the question of change of tax residence not only monetary, but also moral. If there is no confidence in the system, it does not matter how much will be the tax — money will flow out further.

Approximately 60% of wealthy clients from Russia do not wish to declare foreign accounts and change the residency — the study showed consulting companies Tranio and Adam Smith Conferences. The authors also explain that not only the desire to pay less tax, but fears that the financial information about their companies fall to the attackers. Apparently, the opinion of big business will not change even state attempts to improve relations with him. So, at the end of 2017 President Vladimir Putin announced the extension of Amnesty to withdraw money from offshore, but it is unlikely that this measure will reduce the popularity of foreign tax jurisdictions.

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