"Pay to Leave"... Russia Mandates Donations from Western Companies Withdrawing from the Country

Demand for Direct Funding to Government
Comprehensive Pressure on 탈 Russia Companies
Monitoring of 1,400 Foreign Companies

Russia has begun forcing Western companies that chose to withdraw their businesses from the country to donate a portion of the assets they sold. Companies that had planned to exit Russia now find it difficult to avoid criticism for funding Russia's war efforts.

Vladimir Putin, President of Russia [Photo by Yonhap News]

Major foreign media outlets reported on the 27th (local time) that Russia's Foreign Investment Oversight Government Committee demanded companies deciding to withdraw from Russia to directly donate a certain amount of funds to the Russian government.

As the exodus of global companies from Russia continues, Russian authorities have devised measures to impose donations forcibly rather than relying on voluntary contributions. The intention is to apply comprehensive pressure on companies to encourage them to remain in Russia.

Ilya Rakhkov, a partner at the Russian law firm 'Nekrotov, Saveliev & Partners,' told major foreign media, "The biggest difference between the existing method and the new regulation is that companies no longer have a choice regarding (donations)," adding, "This is effectively equivalent to property seizure."

Until now, companies leaving Russia paid 10% of the assets sold to the Russian government as tax or voluntarily contributed a portion of the assets to the national budget. The Russian government also allowed companies to defer payment of the sale proceeds for several years if they wished.

Additionally, Russian authorities have begun extensive monitoring of companies that have legal entities in the country and generate profits in the hundreds of millions. The Kyiv School of Economics’ Kyiv Institute stated, "The Russian government is monitoring 1,400 foreign companies that have legal entities in Russia and earn at least $5 million annually," adding, "Only 205 of these have completely sold off their Russian business units."

As a result, some companies have reportedly abandoned their withdrawal plans after facing prolonged negotiations with authorities to sell their business units. An anonymous source familiar with global companies in Russia said, "Currently, about 2,000 business withdrawal applications are awaiting the committee's approval," and "The committee holds meetings three times a month, reviewing withdrawal applications from seven companies per meeting."

Even if withdrawal is approved, companies are expected to face difficulties related to donation payments. Major foreign media expressed concern, stating, "This announcement (regarding mandatory donations) increases pressure on Western companies that have not fully withdrawn from Russia since the start of Russia's invasion of Ukraine," and "Companies will face criticism for contributing to Russia's war funding by directly paying into the Russian national budget."