Mrs. C lives in Moscow and is the managing director of a Russian company (Russia Co) that manufactures protection against biological and chemical weapons. The company has received a license for the production of these protections from Mrs. C, who holds the worldwide patents on a device that is used in the production of the protection. Mrs. C holds 50% of the shares in the Russia Co and so receives a large amount of royalties and dividends from it, for which she is subject to Russian Federation tax. Mrs. C wants to know whether she can exploit the patents in a more tax-effective way by bringing them offshore. She also wants to use the proceeds for charitable purposes and the education of her grandchildren. Mrs. C has one son, who is 10-years-old.
Mrs. C can set up a trust for the purpose of divesting the personal assets. If a trust like this is set up, the first point to consider is whether there will be any Russian tax implications, regarding the transfer of the shares and the patent to an offshore trust.
There is no Russian gift tax liability and so, we can move the assets abroad to an offshore trust, which has been established in a low-tax country.
For a tax effective solution, the exploitation of the patents and the shareholding in the Russian company will have to be structured through separate intermediate holding companies.