Russian media: Foreign companies actively moving to Russian offshore centers

Companies have significantly increased their presence in domestic offshore centres on the Russky and Oktyabrsky islands.

In January-February 2023, 87 companies legally moved to special administrative districts created on these islands, the Izvestia newspaper reports.

For the same period of 2022, there were 34 such companies, and for the entire 2022 - 83 companies. Notably, the offshore zones were created mainly for the registration of foreign companies there (transfer of legal entities with Russian capital from foreign offshore centres to Russian ones), Russian companies have been able to move to administrative districts only since March 2022.

In particular, 62 international companies are registered on Russky Island, with total assets of about 5 trillion rubles. At the same time, in the first eight months of 2023, 45 organisations completed re-domiciliation (i.e. re-registration of a company from another country to Russia), which is almost three times more than in all previous years. Some 80 per cent moved from offshore Cyprus, 13 per cent from the British Virgin Islands.

October Island has had 204 participants from 2019 through early September 2023. Since the beginning of this year, 72 companies have moved there, including Sbermarket, VK started the re-domiciliation procedure on the island in August.

According to the newspaper, such an increase in the popularity of companies moving to Russian offshore centres is due to the fact that companies with Russian shareholders face problems when doing business in unfriendly countries. In addition, Russia has restrictions on foreign entities.

Now companies with foreign participation need to obtain permits to sell real estate, stakes and shares. Foreign shareholders are also deprived of the opportunity to receive dividends in currency to foreign accounts. And in the special administrative districts, foreign companies can move and do business.

In addition, in June 2023, the Finance Ministry increased the blacklist of offshore companies, and companies registered there will no longer be exempt from taxes when selling shares of foreign subsidiaries and other benefits, which also encourages many foreign organisations with Russian beneficiaries to change their jurisdiction.

The districts were established in 2018, with 268 companies now registered in them. A reduced corporate income tax of 10 per cent applies there (20 per cent in Russia as a whole). There is no currency control in these zones. Companies in the districts will be able to use foreign corporate law until 2039 (i.e. they can operate under the norms adopted in another country - where they were originally registered).