Russian companies with foreign subsidiaries, and foreign companies with Russian affiliates seeking to wind down operations in Russia, face persistent challenges in coordinating with the Federal Tax Service. Experts at the consulting firm Business Solutions and Technologies (formerly Deloitte) highlighted this friction, noting that it creates a practical barrier to cleanly separating the entities involved. The remark was reported by RBC.
The slowing pace of liquidation began before the latest round of sanctions and the broader retreat of foreign firms from Russia, but the past nine months have intensified the difficulty.
A central issue is the directive from parent offices abroad that prohibits subsidiaries from remitting taxes to the Russian budget. DRT stresses that this is a decision made at the top by US-based companies, with the United States allowing US-controlled entities to pay Russian taxes until March 2023 despite sanctions.
Even if a foreign firm or its Russian unit declares liquidation, tax payments remain mandatory. Firm leaders may face penalties, including criminal charges, for tax evasion or failing to file tax returns.
Many firms that announced their withdrawal from Russia and planned liquidation still face fines and potential criminal proceedings, though specific entities were not named by experts. Analysts say foreign companies find themselves caught between conflicting directives from their parent organizations and the requirements of Russian law.
Anton Zykov, partner at DRT and head of the tax dispute resolution group, noted a surge in inquiries from foreign clients about the consequences of stopping tax payments and filing returns.
Irina Barchuk of DRT outlined a coordinated exit route. A foreign company should maintain accurate reporting and statements, enabling the Federal Tax Service to collect monies held in the company’s accounts in line with Article 46 of the Tax Code of the Russian Federation. This approach allows the legal entity to bypass the ban on paying taxes to the Russian budget from the foreign headquarters.
Without a formal statement, entities risk paired penalties for tax non-payment and failure to submit reports. Local branch leaders may face administrative or criminal liability depending on how much tax remains unpaid.
Barchuk also cited on-site inspections by the Federal Tax Service as another obstacle to timely liquidation, noting that the finance ministry has placed a moratorium on scheduled labor audits since the pandemic, though it does not apply to field tax audits.
When a company is under on-site Tax Service scrutiny, liquidation cannot proceed until the audit concludes, which can take months. In such cases, authorities advise applying to halt the liquidation process, since resuming it is not possible until at least six months have passed.
Yury Aksyonov, a partner at Orchards law firm, remarked that on-site audits are standard for foreign entities that have announced liquidation and have engaged in commercial activities. He added that modern tax control measures can protect not only budget interests but also employees and counterparties of the liquidated entity.
Experts therefore conclude that a substantial number of foreign entities and their Russian subsidiaries are currently in liquidation mode. The Federal Tax Service requires all such entities to settle taxes before departing. To facilitate exits, firms should initiate payments proactively.
According to September 2022 data from Rostrud, between March and July about 3,000 foreign companies announced formal liquidation or temporary suspensions in Russia. Analysts note that many have since completed withdrawals, transferring assets locally or continuing operations under new brands.
On December 1, President Vladimir Putin stated that some companies that left Russia and sold their operations due to sanctions later sought to re-enter the market. He observed that some exit strategies involved transferring substantial assets to management for nominal sums in hopes of securing favorable future deals.