: :inin Kyiv (EET)

Russia develops bills to turn occupied Crimea into offshore jurisdiction


Russia`s State Duma is preparing a package of bills, initiated by Deputy Chairman of the House Foreign Affairs Committee Alexei Chepa (”Fair Russia”), on the introduction of an offshore regime in the annexed Crimea, according to Kommersant publication.

In addition to expanding tax benefits, the amendments propose a mechanism for creating trusts in the occupied Crimea, which would provide anonymity to investors in the peninsula, allowing them to avoid sanctions regime, Kommersant reports.

Free economic zone (FEZ) has already been operating in the occupied Crimea and the city of Sevastopol, but it is focused mainly on local businesses.


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One of the new bills introduces amendments to the Tax Code, and others – to the Civil Code and another 15 laws. It is proposed to legitimize in the Civil Code a new type of limited liability company ”International Company,” as well as introduce the articles ”International Trusts,” and ”Family Funds.”

Trusts are probably the most interesting part of innovations, since they are to provide anonymity to investors in the annexed Crimea. Under the usual trust management, the owner of assets is revealed; however, the Crimean trusts, according to the plan, are to receive the right to own the assets transferred to them. In this case, the beneficiary will not be disclosed, while keeping its profits.

In addition, the authors of the law want to allow in the occupied Crimea the activities that are impossible in the rest of the Russian Federation. That is, foreign banks, insurance companies, pension funds and broker companies are offered the opportunity to operate without a license (if available in their country). Further, a simplified procedure for obtaining Russian citizenship is envisaged for investors injecting over EUR 1 million in the bonds of the annexed Crimea and Sevastopol. A visa-free regime is also offered to foreigners arriving on the peninsula. Moreover, another bonus is stipulated, namely the exemption from forex control of operations in the International Transit Zone.

Partner at Paragon Advice Alexander Zakharov notes that, if the amendments are adopted, Russia may face refusal of other states to cooperate within the project on the exchange of tax data.


See also: Kremlin rules out another referendum in occupied Crimea for lifting sanctions


According to him, the initiatives run counter to the efforts of the G20 and OECD to combat shell companies. The consolidation of such advantages in the law would violate the recommendations of the 1998 OECD Report on Harmful Tax Competition and the 1997 EC Code of Conduct for Business Taxation.

”We are not introducing an offshore jurisdiction, but we are fighting sanctions that could threaten business activities in Crimea,” said Chepa, adding that the bill was earlier sent to the presidential legal department. However, there are comments that it contradicts Russia`s agreements, for example, on the need to disclose ultimate beneficiaries. The deputy explained that the project had not been submitted to the State Duma yet.

”It would be correct to first propose it to consideration by all factions,” Chepa said, noting that he would invite colleagues from other factions to join the initiative following the May holidays.


See also: Russian aggression against Ukraine, international law and global security: 25 key theses


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