Owners of controlled foreign companies must decide on the lump-sum regime

By 31 December 2024 (we recommend filing by 28 December 2024, because of the days off), owners of controlled foreign companies (CFCs) must decide whether to continue the lump-sum tax regime for 2025, or to leave it.

We set out who must file an application, and who need not.

Who needs to file an application?

• Owners of CFCs who moved to the lump-sum regime in 2022.

The mandatory minimum period for applying the lump-sum regime was then 3 years, and that period expires in 2024.

• You now have the right to confirm once again that you wish to extend the lump-sum regime for 2024 and thereafter.

• If you do not file an application, from 20245 you will have to pay tax on the actual profit of the CFC.

Who does not need to file an application?

• Owners of CFCs who moved to the lump-sum regime in 2023 or later.

A mandatory period of 5 years applies to you. There is no need to file an application: the lump-sum regime will apply automatically until the minimum period expires.

What happens if you do not file an application

If your three-year period of the lump-sum regime has already expired, but you have not filed a fresh application to extend the regime by the end of 2024, the following changes will take place:

• The lump-sum regime will cease to apply.

• From 2025 the tax burden will be calculated under the standard rules, on the basis of the actual profit of each CFC.

You will be obliged:

• to calculate the profit yourself;

• to provide the CFC's financial statements to the tax authority.

Filing the application matters for those owners of CFCs whose mandatory period of the lump-sum regime has come to an end. If you want to keep a fixed tax burden (RUB 5 million), do not forget to notify the tax authority. Otherwise you return to the standard rules of taxation, which can mean higher tax costs and higher administrative costs.

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