02.06.06

A Russian organization, among whose founders are foreign organizations, has received a decision from the Ministry of Finance about reducing its authorized stock capital. It was explained that in order to transfer property from the organization, the organization can not be in the process of liquidation and the member organization that receives the property must remain a member even after the transaction. Any funds or property received as a result of such a transaction will be fully taxable as income. However, if the income can be claimed in a foreign country and there exists an agreement on double taxation between the Russian Federation and that country, taxes should be declared as stipulated in that international agreement.

Source: Ministry of Finance Letter dated 10 May 2006 # 03-03-04/1/428

This question is actually answered within article 309 of the Tax Code of the Russian Federation in exactly the same manner as in the Ministry's letter.  Therefore, the findings do not give any new information but rather only reaffirm what is written in the law.  The major issue in question, however, is that the agreement between the RF and the country in which the recipient organization is registered must be carefully examined.