A law dated 29 December 2012 added two articles to the Tax Code of the Russian Federation with regard to taxation of yields on securities of Russian issuers paid to foreign companies acting in the interests of third parties (the “Amendments”).

By virtue of the Amendments, depositories, since they are tax agents, when paying yields on securities must compute and withhold tax on the basis of information on the security holders - individuals and companies.

If information on the security holders was not provided or was not provided in full then yields on the respective securities are subject to a 30% tax rate.

The above law stipulates that the Amendments concern federal government issue-grade securities regardless of their registration date and other securities registered after 1 January 2012 and recognized on a custodian account of a foreign nominee holder, on a custodian account of a foreign authorized holder and/or on a custodian account for a depository programme.

The Amendments do not affect foreign investment funds (investment companies), which are regarded as collective investment schemes according to the law under which such funds are established.

Therefore, those security holders that do not desire to disclose information on themselves will have to pay tax at an increased rate. It is obvious that these provisions are aimed at increasing the “transparency” of the final beneficiaries of such income.

Amendments came into force from 30 December 2012.

[Federal Law No. 282-FZ “On Amending Certain Legislative Acts of the Russian Federation and Annulment of Certain Provisions of Legislative Acts of the Russian Federation”, dated 29 December 2012]