While the entire world has been waiting to see what the Cypriot government will do about a proposed one-time levy on bank accounts, the Russian oligarchs that base their companies (and shell companies) on the island say they’ve already moved their cash out.
“You must be out of your mind!” snapped tycoon Igor Zyuzin, main owner of New York-listed coal-to-steel group Mechel, as he dismissed a suggestion this week that the financial meltdown in Cyprus posed a risk to his interests.
If Zyuzin isn’t enough, there’s also Mikhail Fridman, the #50 richest man in the world according to Bloomberg’s Billionaire Index. Yesterday he scored a major payday selling his part of oil company TNK-BP to Russian state oil firm Rosneft netting $5.1 billion.
Part of his Fridman’s investment firm, Alfa Group, is based in Cyprus. The entity is called Alfa Capital Holdings, and here’s what’s been on their website all week.
According to Reuters, now that the oligarchs have moved out, its likely that upper middle class/entrepreneur types will feel most of the pain if the Cyprus tax is enacted.
Part of that is because there’s no penalty to move money out of Cyprus. There’s no tax on transferring shares of a Cyprus company and there’s no withholding tax charged on a dividends moving from a Cypriot company to its EU parent company.
So Russian oligarchs have entities in Cyprus and in other tax havens as well (of course).
Take Alisher Usmanov for instance, the richest man in Russia and an early investor in Facebook. He owns USM Steel & Mining Group Limited (formerly known as Gallagher Holdings) based in Cyprus.
He also has a British Virgin Islands holdings company USM Holdings, according to Bloomberg.
Cyprus has no capital gains tax and holding companies are not subject to any withholding tax on dividends, but there’s is a 10% tax on income, whereas there’s no corporate income tax in the British Virgin Islands.
You do the maths.
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