Cross-border Legitimacy Aspects of the Russian Tax Minimization Insurance Schemes

In the beginning of 2005 the Russian Revenue Authorities (FNS) launched another wave of due diligence examinations of the insurance companies that use so-called "gray schemes" to minimize taxation for their clients. The insurance schemes in question do not violate the existing insurance law, but they can contain violations of Russian tax laws and, accordingly, of Russian criminal law, subject to a formal investigation. The tax minimization schemes usually have the following pattern: the Russian company, seeking to minimize its tax burden, signs an insurance contract with the Russian insurance company to insure the variety of its commercial and industrial risks. The premiums paid under these contracts are tax deductible. These inflated premiums are often moved abroad by way of re-insuring the risks in question through captive offshore reinsurance companies...[more]