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Lease Of Property Requires Permanent Establishment


A new Letter from the Ministry of Finance asserts that a foreign company which owns real estate in Russia must be registered with the tax authorities according to the location of the property in question.

If a foreign company regularly leases out its property, searching for tenants, entering into lease agreements and agreements for maintenance and repair of facilities, etc. with them, then the company should have a permanent establishment in Russia.

Accordingly, taxation of revenues from such business activity in Russia which required a  permanent representation to be established must be conducted in accordance with standard procedures as set by Russian tax legislation.

This is according to the Letter of the Ministry of Finance # 03-08-05 from March 25, 2011, written to clarify issues of tax registration specifically for a Cyprus resident holding property in Russia, but Ministry Letters are considered to be indicative of general policy at the Ministry.

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