Russia: CFC profit to be taxed without the RUB 10 million threshold from 2027

In brief

• The government submitted bill No. 617-9 to the Duma on 30 September 2026. On 26 October the Budget and Taxes Committee recommended adopting it at first reading, the reading is scheduled for 29 October, and amendments for the second reading are accepted until 12 November.
• The bill abolishes the RUB 10 million threshold below which CFC profit is currently not taxed. The explanatory memorandum calls it a temporary transitional measure.
• At the same time the stake that makes someone a controlling person rises from 25% to 50%. Notification of participation in a foreign company for stakes above 10% remains mandatory.
• The CFC rules take effect on 1 January 2027. In our assessment, the first profit affected will be that for the financial year ending in 2026.
• Penalties for CFC breaches rise: for an unfiled CFC notification, from RUB 500,000 to RUB 754,000 per company.
• This is not yet law: the second and third readings, the Federation Council and the President's signature are still ahead. The text may change.

What is proposed

Bill No. 617-9 "On amendments to Parts One and Two of the Tax Code of the Russian Federation and certain legislative acts" was submitted by the Government. It implements the main directions of tax policy for 2027-2029, which the Ministry of Finance published together with the draft budget. The amendments are wide-ranging: personal income tax, VAT, corporate profit tax, penalties. The section on controlled foreign companies is short, but for owners of foreign companies it is the one that matters most.

The key amendment is brief: paragraph 7 of Article 25.15 of the Tax Code is repealed. This is the provision that currently says CFC profit is taken into account for tax only if it exceeds RUB 10 million. In the explanatory memorandum the Government explains that the threshold was introduced at the initial stage as a temporary transitional measure, and it is now being removed at the same time as the participation threshold rises from 25% to 50%. The logic is simple: there will be fewer controlling persons, but for those who remain, all profit will be taxed.

Beyond the threshold, the bill changes several other things. If a person solely controls a company under its charter or under the law of its country of registration, that control is treated as a 100% stake; according to the memorandum, this codifies existing practice. The notification of participation and the CFC notification will have to state the date the company was established. The deadline for reporting a change in the terms of participation or its termination is also clarified: the Government writes that there is currently uncertainty here.

What this means for you. If you own a small foreign company with profit below RUB 10 million and currently file only a notification, with no tax, this arrangement will most likely end from 2027. It is worth preparing now, before the law is passed.

How the threshold works now

Today a Russian tax resident who controls a foreign company files a CFC notification every year, together with documents confirming its profit or loss. This is mandatory even if the company earned nothing or its profit is exempt: the Federal Tax Service specifically reminds taxpayers that the notification is filed in case of a loss and in case of an exemption. The RUB 10 million threshold exempts only from tax, not from reporting. I covered these obligations in detail in the article on CFCs and currency control.

An important detail that is often misunderstood: the threshold does not work as an allowance. If CFC profit for the year is RUB 9.9 million, it is not taxed at all. If it is RUB 10.1 million, the whole amount enters the tax base, not just the RUB 100,000 above the threshold. That is why many owners of small trading, consulting and holding companies kept profit below this mark for years and paid tax only on dividends when they actually took money out.

An individual's CFC profit is currently taxed under the general progressive personal income tax scale of 13% to 22%, together with salary and several other types of income. The rate depends on the total for the year: 13% up to RUB 2.4 million, 15% from 2.4 to 5 million, 18% from 5 to 20 million, 20% from 20 to 50 million and 22% above 50 million. The same bill proposes adding dividends, deposit interest and securities income to this aggregate; see the news item on the personal income tax scale of up to 22% for passive income.

Where the bill stands

The bill was registered in the Duma on 30 September 2026. On 1 October the Duma Council appointed the Budget and Taxes Committee as the responsible committee and set 15 October as the deadline for comments. On 26 October the committee decided to propose that the Duma adopt the bill at first reading on 29 October and recommended 12 November as the deadline for amendments. On 28 October the Duma Council put it on the agenda for 29 October. The bill's page in the Duma's legislative system also contains opinions from the Legal Department and the Accounts Chamber.

A first reading means approval of the concept, not of the final text. Before the second reading, deputies and the Government table amendments, and the figures may change. For the CFC rules to apply from 1 January 2027, the law must pass three readings, be approved by the Federation Council, be signed and be published before the end of the year. We are following the bill's page and will update this news item after each stage.

I would not count on the threshold surviving to the second reading. In the explanatory memorandum the Government directly links its abolition to raising the participation threshold to 50%: these are two parts of one decision, not a separate amendment that is easy to drop. It is more sensible to plan on the basis of the text submitted to the Duma and to revisit the calculation if changes appear before the second reading.

What this means for you. Until the law is passed, the current rules apply: CFC profit up to RUB 10 million is not taxed. But decisions on distributing 2026 profit and on the company structure are better made with the new wording in mind.

Which profit the new rule will start with

Under the bill, Articles 25.13-25.15 on CFCs take effect on 1 January 2027, with no separate transitional rules for the threshold. For an individual, CFC profit is treated as received on 31 December of the year following the year in which the company's financial year ended. For example, profit for the 2026 financial year of a company with a calendar financial year is recognised as income on 31 December 2027 and falls into the tax base for 2027.

Hence our assessment: if the law is adopted as drafted, the first CFC profit counted without the threshold will be that for the financial year ending in 2026. An individual files the CFC notification and the personal income tax return for it by 30 April 2028 and pays the tax by 15 July 2028. Profit for 2025, which is recognised as income on 31 December 2026, is on this logic calculated under the current rules, with the threshold. The final procedure will be clear from the adopted text and guidance from the Ministry of Finance.

The deadlines in the table come from the current Tax Code and Federal Tax Service materials: companies file the CFC notification by 20 March, individuals by 30 April of the year after the year in which the profit is recognised. If a deadline falls on a weekend, it moves to the next working day. The notification of participation in a foreign entity is filed within three months of acquiring the stake or changing it; the bill also clarifies the deadline for a change in the terms of participation or its termination.

Worked example

Take a Russian tax resident who owns 100% of one foreign company. Its profit for the 2026 financial year is RUB 6 million at the conversion rate, the company has paid no dividends and has no exemptions under Article 25.13-1. Now the profit is below RUB 10 million, so there is no tax: the owner files the CFC notification and the profit documents, and that is all.

Under the bill, this RUB 6 million will be included in 2027 income. If the person has no other income in the general aggregate, the tax under the scale will be RUB 312,000 on the first 2.4 million, RUB 390,000 on the amount from 2.4 to 5 million and RUB 180,000 on the last million at 18%. That is RUB 882,000 in total. If the person also has salary or other income in the same aggregate, part of the profit will fall into higher bands and the tax will be higher. Tax the company has already paid in its own country can be credited under the Code; this reduces the amount payable in Russia but does not remove the need for a return.

Now the case of a 30% stake. Today such a participant is a controlling person. Under the bill, with a stake of up to 50% they will cease to be one, unless Russian residents together own more than 50% of the company: then the second test applies, a stake of more than 10%. If the owner solely manages the company under its charter, their stake is treated as 100% under the bill, whatever the formal figure. Notification of participation for stakes above 10% remains mandatory in any case.

What this means for you. For the owner of a small single-shareholder company, abolishing the threshold means real tax on undistributed profit. For a minority holder with 25% to 50%, the bill may instead remove CFC obligations, but only if the second test or sole control does not apply.

Penalties for CFC mistakes

The same bill indexes almost all fixed penalties in Part One of the Tax Code. In the explanatory memorandum the Government explains this by the inflation accumulated since they were set. For CFC owners the changes are as follows.

Penalties are charged per company. If a person forgot to file notifications for three CFCs, under the new figures that is RUB 2.26 million for the notifications alone. Under the bill the new penalty amounts apply from 1 January 2027. So if any notifications for previous years have not been filed, it is better to fix this before the end of 2026. On how to respond to tax authority requests about foreign accounts and companies, see the article on tax authority requests about a foreign account.

What the bill does not change

The bill does not abolish CFC profit exemptions under Article 25.13-1. If a company is an active foreign company, is registered in a member state of the Eurasian Economic Union or meets other grounds in that article, its profit can still be exempted from tax if the conditions are met and supporting documents are filed. The bill also leaves the fixed CFC profit tax regime untouched.

There are also some reliefs. Currently, penalties for failing to file CFC profit documents do not apply for financial years ending in 2022-2024 if the owner, because of sanctions, cannot obtain the accounts of a company located in an unfriendly country. The bill extends this rule to financial years ending up to 2030. For Russian companies, the option to defer tax on CFC profit where sanctions prevent the company from distributing dividends is extended to 2030.

The core principle does not change either: CFC rules apply only to Russian tax residents. Residence is determined by the number of days spent in the country, not by passport; a second citizenship does not by itself remove the obligations. How residence is determined is explained in the articles on tax residence and on the 183-day rule, and the term tax residency is in the glossary.

What CFC owners should do now

It is best to review the structure as a whole: the company, your personal tax residence, your bank accounts. Sometimes it pays to keep the company and pay the tax, sometimes to move the business to a jurisdiction with a double tax treaty, sometimes to change residence. Countries are compared in the overview of the best countries for tax residence and in the article on UAE tax residence.

BRIDGES handles this end to end: tax coordination of the structure, choice of jurisdiction, changes to the company structure, company registration in the UAE and Cyprus, trusts. What a trust is and how it relates to CFC rules is explained in the glossary. An overview of the whole bill for owners of foreign assets is in the news item on the 2027 tax reform. On notifications of foreign accounts, see the articles on notifying the tax authority of an account and on accounts and second citizenship.

What this means for you. There is no need to sell or close anything in a hurry. What you need to do before the end of the year is check notifications for previous years, calculate the 2026 tax under the new rules and make a decision on the structure while there is time.

You can go through your situation at an online consultation; all BRIDGES services are on the home page.

How this article was prepared

Sources: bill No. 617-9 submitted by the Government of the Russian Federation to the State Duma on 30 September 2026, its text and explanatory memorandum, the bill's record in the State Duma legislative system (sozd.duma.gov.ru/bill/617-9) with the decisions of the Budget and Taxes Committee of 26 October and the Duma Council of 28 October 2026; the main directions of budget, tax and customs tariff policy for 2027 and the planning period of 2028 and 2029 (Ministry of Finance of Russia); the current Tax Code and Federal Tax Service materials on CFCs. The worked example is illustrative. The assessment of which profit the new rule will start with is ours; the final text of the law may differ. This article does not replace advice from a tax lawyer.