Government demanded reports on foreign subsidiaries from state companies

Government demanded reports on foreign subsidiaries from state companies
Igor Shuvalov

State companies should report on assets, which they own in Russia through foreign subsidiaries - such directive was sent to them by the government. The authorities want to understand how widespread is this practice.

The government asked state companies to report on the Russian assets, which they own through foreign legal persons. The directive with the relevant requirement was signed by First Deputy Prime Minister Igor Shuvalov is at the disposal of RBC.

The document approved by Shuvalov was sent on August 25 to representatives of interests of Russia in state companies and obliges them to initiate meetings of the Board of Directors within ten days, to include a question of such assets on the agenda. State companies should send the reports to the Ministry of Economic Development within 30 days from the moment of obtaining the directive, that is by the end of September. The press service of the Ministry of Economic Development readdressed the question of RBC to the government, Rosimushchestvo did not respond to the request, Shuvalov's secretariat refused to comment.

It is about assets which the companies own through foreign legal entities, but which at the same time are in the territory of Russia. The first reporting period — 2016, and further - annually. The source of RBC in the Ministry of Economic Development says that this assignment on the collection of information within deoffshorization process and also attempt to understand where the companies optimize taxes. “After obtaining information from the companies it will be structured, on its basis, a report for the government would be prepared on how it is possible to increase tax payments of the companies in the budget. The companies have the right to create foreign subsidiaries, but in each separate case the need of possession of Russian assets through them should be justified”, the interlocutor of RBC said. According to him, information has not come to the department yet, it is being prepared.

Why is this information necessary?

President Vladimir Putin declared that the Russian state companies should be brought out of offshores in 2011. “There are no special deadlines on deoffshorization in the nearest future. Perhaps, the concern of state agencies is connected with automatic exchange of tax information which should begin in 2018 and on which foreign tax authorities can obtain information, undesirable to the Russian authorities”, senior lawyer of Herbert Smith Freehills Sergey Eremin reminds.

From the point of view of deoffshorization information requested by the government is necessary for the collection of data on the existence of the under control foreign companies which may become taxpayers, head of tax practice of BMS Law Firm David Kapianidze says. But also, he argues, it can be connected with the fact that the authorities want to understand what companies may appear under ‘blow’ abroad in connection with an unstable political situation, and, respectively, want to exclude risks of presentation of claims to such companies, blocking of their money or assets.

As a source in the government explained RBC, the directive is a certain signal for the state companies, the first step in deoffshorization of foreign assets of state companies. At the first stage, it is necessary to understand, how widely is this practice applied, and stimulation measures will be taken for transfer of these assets to the Russian jurisdiction then, he specifies. Companies should report on the assets registered on foreign legal persons in the nearest future, the interlocutor of RBC explained.

Which state companies have such assets?

The directive is delivered to the companies from the appropriate list of Federal Property Management Agency  Rosimushchestvo (the special list 91-r) there are Gazprom, Rosneft, the Russian Railway, Rosneftegaz, ALROSA, RusHydro, Rosselkhozbank, Sovcomflot, the Novorossiysk Commercial Sea Port (NCSP), the United Shipbuilding Company (USC), etc. — in total 50 names figure. The question of provision of information on the assets issued on foreign subsidiaries was included in the camp-up of the forthcoming or already passed meetings of the boards of directors of Rostelecom, Transneft, NMTP, the Agency for Housing Mortgage Lending; The State transport leasing company already voted for provision of data to the government, follows from the appropriate disclosures of these companies.

The scale of use of foreign structures, which own Russian assets, by state companies is not clear so far. The representative of the Russian Railway reported to RBC that the company requested from the Ministry of Economic Development an explanation, the directives concerning a row of provisions (in particular, specification of criteria of property, necessary to declaring). After their receiving the company will provide the list in accordance with the established procedure, he added. According to him, two subsidiaries of the Russian Railway — the French GEFCO (the international logistic company) and the Maltese Black Sea Ferries which is engaged in the transportation of goods in railway ferry traffics in basins of the Baltic and Black seas fall under criteria of the directive.

Sovcomflot, NMTP, Aeroflot, RusHydro, Inter RAO did not respond RBC to the requests. The representative of OSK told that among its group there are no companies about which the government asks to report.

The initiative of the government is directed to the collection of information about joint ventures of the Russian state companies with foreign investors, Eremin supposes. “In many cases, such joint ventures were created abroad and owned the Russian assets. In a number of branches at the legislative level, or upon it is forbidden to transfer a majority stake in an asset to foreigners, therefore, state companies own more than 50 percent packets through the foreign joint ventures”, he marks.

For example, within the strategic partnership of Rosneft and the American ExxonMobil joint ventures Tuapsemorneftegaz SARL and Karmorneftegaz SARL were registered in Luxembourg before sanctions, for projects in the Black and Karsky seas in Russia. Rosneft owns the majority of shares in them. The source of RBC in Rosneft told that as the directive exists, after its receiving the board of directors will be called, and the question considered. “It is a purely technical moment. Probably, time is just necessary. But Rosneftegaz as the main shareholder of Rosneft should make the decision”, interlocutor of RBC explained. The press secretary of the company Mikhail Leontyev does not comment on Shuvalov's directive.

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