Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

August 15, 2019

Russian Tax Authority issues guidance on the application of beneficial ownership rules to holding companies

On 8 August 2019, Russia’s Federal Tax Service (FTS) issued guidance to the tax authorities regarding application of the beneficial ownership rules to holding and investment companies.1

The guidance states that tax authorities must refrain from taking an overly formalistic approach to the determination of beneficial ownership, noting the current tendency of many authorities to conclude that an entity cannot be the beneficial owner of income if it only carries on holding activities (confirmed by corporate documents).

The guidance reminds tax authorities that the fact that a company makes investments and finances related entities does not automatically mean that it does not carry on independent business. Consequently, the mention of “holding activities” and “investment” among the stated activities of a foreign entity is not a sufficient basis in itself for drawing conclusions about beneficial ownership.

Tax authorities are advised to approach each case individually, checking for specific indications of artificiality in a holding company’s activities, including the lack of independence in decision-making in relation to assets and income received.

The FTS’s guidance is, on the whole, a positive development for taxpayers and tax agents, but it is important to recognize that the presence of a holding company and investment companies in a group’s composition must serve a business purpose. The entry into force of the OECD2 Multilateral Convention3 will add the principal purpose test to the existing criteria for obtaining tax treaty benefits and further impact the process of evidencing that benefits have been lawfully used.


1. Federal Tax Service Letter No. YeD-4-13/15696@ of 8 August 2019 “On Beneficial Ownership by Holding Companies of Income from Sources in the Russian Federation.”

2. Organisation for Economic Co-operation and Development.

3. See EY Global Tax Alert, The Latest on BEPS – 28 June 2019, dated 28 June 2019.

For additional information with respect to this Alert, please contact the following:

Ernst & Young, Moscow
  • Vladimir Zheltonogov |
  • Oleg Lvov |
  • Svetlana Sokolova |
Ernst & Young LLP (United States), Russian Tax Desk, New York
  • Kirill Lukyanets |



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more