/ world today news/ Cyprus announced a mass exodus of large Russian companies from its jurisdiction. The number of such companies has already reached double digits, and this is most likely not the end. Many of them return back to Russia. Why did the escape from the once paradise offshore begin? And why do some companies settle not in Russia, but in Kazakhstan and other countries?
Large Russian companies are leaving Cyprus en masse, writes the Cypriot newspaper Phililefteros. According to the publication, a double-digit number of companies have already announced their desire to leave, and other companies will soon follow suit. They plan to move to Russia, Kazakhstan or other friendly countries.
In particular, Tinkoff Bank’s parent company TCS Group, developer Etalon Group, retailer Fix Price, market Ozone, holding company of European Medical Center Medical Group, Transmashholding and Globaltrans plans to leave Cyprus.
Why did the mass exodus from Cyprus, the favorite place of Russian companies to optimize taxes, start only now, and not in 2022 and 2023? Why are some companies fleeing to Kazakhstan and other jurisdictions outside of Russia? And how did Russia manage to lure back the Russian giants?
The Cypriot newspaper cited the policy of the Cypriot authorities as the reason for this “emigration”, which began to hinder the bypass of Western countries. The President of the Republic, Nikos Christodoulides, said that the fight against sanctions evasion is an opportunity for Cyprus to strengthen its prestige as a reliable business and financial center.
At the end of last year, it was unofficially reported that Cypriot banks were ordered to stop all transactions in rubles. And last spring, Cypriot authorities launched an investigation into a number of companies that were caught hiding assets of oligarchs subject to US sanctions.
“The dependence of the Cypriot economy on the West is obvious and does not allow the local authorities to act only within their own interests,” says Ekaterina Novikova, associate professor of the Department of Economic Theory at the Plekhanov Russian University of Economics.
On the other hand, Russia has created attractive conditions for the return of large companies under its jurisdiction.
“Russian companies returning from Cyprus to Russia can receive quite significant tax benefits in the territories of special administrative regions, including exclusion from the tax base of income in the form of shares of economically significant organizations. The same advantage will apply to personal income tax. Attracting Russian business to the domestic national market should directly affect the country’s additional economic growth,” Novikova believes.
At the same time, as more large taxpayers will appear in Russia, we can expect further growth in the country’s budget revenues due to increased tax collection.
Russia, in particular, has stimulated the return of companies with the help of a law that allows Russian beneficiaries of economically significant organizations through the courts to directly receive dividends from them, as well as shares and shares in direct ownership, bypassing foreign structures from “unfriendly” jurisdictions with an ownership stake of at least 50%. In addition, the rules that an individual cannot pay personal income tax when receiving property of a controlled company have been extended until 2024.
Why do some companies leave Cyprus, but not for Russia?
“The choice of Kazakhstan may be related to the desire to retain foreign investors. For foreign investors, re-registration in Russia does not make sense due to restrictions on the movement of capital. But in the case of re-registration in Kazakhstan, foreign investors will even be able to receive dividends”, notes the analytical department of the Finam financial group.
For example, for freight rail operator Globaltrans and developer Etalon, the move from Cyprus is a step towards resuming dividend payments. Globaltrans decided to move to the Abu Dhabi Free Economic Zone in August. “Currently, the company’s dividend payment is suspended, but the company’s management considers the re-registration as the first step towards paying dividends. This news was received positively by the market: “Globaltrans” shares showed a return higher than the index of the Moscow Stock Exchange, having appreciated by 30% since the middle of 2023″, note the analysts of “Finam”.
And developer Etalon has decided to change its legal address from Cyprus to Oktyabrsky Island in the Kaliningrad region by September 2024. “This strategic move is seen as a step towards removing infrastructure barriers and risk factors and may contribute to the resumption of dividend payments , as well as having a positive impact on the company’s investment prospects,” notes Finam
At the beginning of this week, the shareholders of TCS Group – the parent company of the financial group that includes Tinkoff Bank – also decided to move and immediately raised the price of their securities. The company will be re-registered in Russian Island and literally in the first quarter of this year its name will change to MCPAO “TCS Holding”. “In our opinion, the ‘relocation’ is not related to any kind of ‘intimidation’ of the Cypriot authorities, but rather to the fact that it will facilitate the management in making decisions about Russian assets, and also remove potential risks related to the state of the depository receipts of the group. In addition, the change of registration may allow TCS Group to resume paying dividends. The short-term risk, of course, is the looming sale of TCS Group’s securities after the completion of the “relocation” procedure, but in the long term, this step is still positive for the company and its shareholders,” Finam analysts note. .
Translation: V. Sergeev
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