THE RUSSIAN RETAILER 'RED AND WHITE' NOW INCORPORATED IN CYPRUS

HomeNewsTHE RUSSIAN RETAILER 'RED AND WHITE' NOW INCORPORATED IN CYPRUS

The retail group Krasnoe & Beloe ("Red and White"), known in Russia as a vendor of wines, transferred its main legal entity to a foreign jurisdiction. The company will remain a tax resident of Russia, but will be able to claim a reduced tax rate.

Several major operating companies of Krasnoe & Beloe network changed their owners last month. The alcohol retailer is not consolidated into a holding company: all the operating entities were mainly directly controlled by its founder, Sergei Studennikov. Now, according to the changes, the businessman still remains a 100% beneficiary, but through the Cyprus Amelior Investments Limited, established in March 2019.

The large number of legal entities and the fragmentation of its structure gave rise to tax claims against the company from the Russian tax authority, which resulted in large-scale inspections on the New Year's eve.

Krasnoe & Beloe will continue to pay taxes at the level of Russian assets as usual, but will be able to reduce the tax burden for dividend distribution. With the transfer of the parent company to Cyprus and provided that the company will not be considered as a transit one (i.e. created to drain funds), it may be a subject to a reduced tax rate.

As experts explain, when it comes to the multi-billion-dollar transactions, a preference may be given to a foreign holding company based on the possibility of applying foreign law to these transactions in case of internal corporate conflicts.