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Financial Mirror (Cyprus) - - FRONT PAGE -

Pres­i­dent Vladimir Putin is push­ing harder on Rus­sia’s rich­est cit­i­zens to repa­tri­ate off­shore as­sets amid a slump in the rou­ble and the im­po­si­tion of sanc­tions by the U.S. and the Euro­pean Union, ac­cord­ing to a Bloomberg re­port.

Un­der the new “de-off­sho­ri­sa­tion” tax rules, Rus­sian res­i­dents will from this year pay a tax of 13% on earn­ings re­ported by for­eign com­pa­nies and trusts they con­trol. Should au­thor­i­ties prove those en­ti­ties are man­aged from Rus­sia and don’t have sig­nif­i­cant as­sets or em­ploy­ees abroad, the tax rate in­creases to 20%.

“Many own­ers have started to move eq­uity own­er­ship of business as­sets to Rus­sia,” said Artem Toropov, a Moscow­based lawyer at Golts­blat BLP who deals with in­ter­na­tional tax struc­tur­ing.

Rus­sian pol­icy mak­ers are strug­gling to con­tain the coun­try’s worst cur­rency cri­sis since 1998 after oil prices slumped and the U.S. and Euro­pean Union i mposed sanc­tions over the con­flict in Ukraine. The new tax comes three years after Putin backed ef­forts to per­suade Rus­sian en­trepreneurs and of­fi­cials to repa­tri­ate as much as $1 trln held in off­shore cen­tres from Cyprus to Switzer­land.

USM Hold­ings Ltd., a Bri­tish Vir­gin Is­lands-regis­tered company co-owned by bil­lion­aire Alisher Us­manov, said on De­cem­ber 19 it had trans­ferred con­trol­ling stakes in wire­less op­er­a­tor Me­gaFon (MFON) and iron-ore pro­ducer Me­tal­loin­vest Hold­ing Co. to Rus­sian units be­cause the com­pa­nies “have strate­gic i mpor­tance for the Rus­sian econ­omy.” Us­manov is Rus­sia’s sec­ond-rich­est per­son with a $14 bln net worth.

The same day, Vladimir Litvi­nenko, Putin’s cam­paign man­ager in St. Peters­burg dur­ing elec­tions in 2000 and 2004, said he trans­ferred 4.81% of fer­tiliser maker PhosA­gro from an over­seas trust to Rus­sia, rais­ing his di­rect stake to 14.54%. Litvi­nenko is also head of the St. Peters­burg Min­ing Univer­sity, where Putin got a doc­tor­ate in 1997.

The co-own­ers of Moscow Vnukovo air­port also trans­ferred a stake of 81% from two Cyprus com­pa­nies to Rus­sian-regis­tered Vnukovo Aliance last week to sat­isfy the law, Chair­man Vi­taliy Vant­sev told RIA Novosti on Jan­uary 16.

Those moves are help­ing re­verse an out­flow of as­sets from Rus­sia over the pre­vi­ous 20 years. The Rus­sian cen­tral bank de­ployed emer­gency steps in­clud­ing in­ter­est-rate in­creases and spent $88 bln in in­ter­ven­tions to prop up the rou­ble, which has de­clined almost 50% against the dol­lar in the past 12 months.

All of Rus­sia’s 20 rich­est peo­ple con­trolled a por­tion of their to­tal $181 bln for­tune through hold­ing com­pa­nies regis­tered over­seas, ac­cord­ing to the Bloomberg Billionaires In­dex.

Bil­lion­aire Vik­tor Rash­nikov in De­cem­ber con­sol­i­dated his 87.3% stake in Mag­ni­to­gorsk Iron & Steel in one Cyprus company in­stead of two, a pos­si­ble pre­cur­sor to trans­fer­ring the own­er­ship to Rus­sia, ac­cord­ing to George Buzhen­itsa, an an­a­lyst at Deutsche Bank AG in Moscow.

While it may be in the in­ter­ests of oli­garchs to repa­tri­ate

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