Page 89 - RusRPTJan21

With the changes, Russia is seeking to generate more tax revenue and reduce the flow of capital abroad.
A ​research​ article published by the IMF estimates that 50% of Russia's foreign direct investment goes to the so-called shadow companies that do not have an actual business. Shadow companies account for almost 60% of foreign direct investment in Russia. Russian companies recycle capital, especially through Cyprus and the Netherlands. According to the Russian Ministry of Finance, between 2018 and 2019, a total of about $ 50 billion in capital was exported from Russia in the form of dividends and interest income, and more than $ 10 billion to the Netherlands.
Russia has so far concluded agreement negotiations with Cyprus, Malta and Luxembourg. Under the renewed agreements, Russia may levy a 15% tax on dividends and interest income paid by Russia to these countries instead of the previous 0-5%. There are still a number of exceptions to the agreements (e.g. institutional investors) that are not subject to higher taxation. The new agreements will enter into force at the beginning of 2021. Russia has also been negotiating similar changes with the Netherlands, but at least so far the countries have not been able to reach an agreement and Russia has begun preparations to withdraw from the agreement. The opening of negotiations with Switzerland and Hong Kong has also been on the agenda. At the same time, in order to attract capital to stay domestically, Russia plans to ease the taxation of dividends and interest income in its own "tax havens." In 2018, Russia established special administrative districts in Kaliningrad and Primorsk, which aim to get Russian companies, especially those registered abroad, to move to Russia. Businesses located in the regions receive tax breaks and other benefits. However, companies 'interest in the regions has been less than the authorities' wishes, and only about 40 companies have been registered with them.
6.1.4​ Budget dynamics - regions
The Russian Finance Ministry pledges additional support to regions in 2021, on top of RUB3.1 trillion stipulated by the budget, ​Minister Anton Siluanov told the Federation Council upper house on December 2. "We hope, I am even sure that the aid to the regions of the Russian Federation will increase next year. We will consider the question of the amount during budget fulfillment. But we will monitor the situation with fulfillment of the regional budgets in detail and of course, we will provide help with fulfillment of the first priority obligations," Siluanov said. The budget envisages RUB3.1 trillion of inter-budget transfers in 2021, RUB2.8 trillion in 2022 and RUB2.9 trillion in 2023.
Russian Prime Minister Mikhail Mishustin announced that the government will allocate RUB10bn ($133.2mn) to 25 regions to ensure a
89 ​RUSSIA Country Report​ January 2021 ​ ​www.intellinews.com