Second move: Fast loans group lends cash to itself
In 2012, when Fatcat reached 43 million Euro in profits, the company paid only 366,762 Euro taxes on profits. This represents only 0.7 per cent.
Malta charges companies at the highest rate of income tax – 35 per cent – on their profits. But if the company’s activities and shareholders are mainly based abroad, they have a refundable tax credit mechanism that results in a reduced tax rate on income or gains that can go as low as five per cent.
Additionally, in Malta there is no withholding tax on dividends, interests and royalties. And Maltese tax on capital gains for non-residents, which should include Boyko’s purchase of shares in 4finance, is a whopping zero per cent.
Boyko bought out the rest of the company in 2013. According to the signed financial statements for 2013, Fatcat Investment Limited (then called FCI) had 57 million Euro profits before taxation. But it paid only 512,501 Euro in taxes. An impressive 0.9 per cent.
4finance then embarked on a bizarre system of granting loans to its own companies, thus draining the profits of its European subsidiaries and centralising the cash flow in Malta.
In this way, 4finance Malta Ltd collected almost 68 million Euro in loan interests between 2013 and 2015 and shifted profits from other countries to the tax-friendly Mediterranean nation.
Because these 11 to 13 per cent rates were high, they demanded high interest rates in shareholder loans between the parent company and subsidiaries who were providing dozens of thousands of small loans in many countries
After his buy-out of 4finance in 2013, Boyko soon established full control over the group, liquidated FCI Investments, and now – with the assistance of two Latvians who were at the helm of Fatcat, Uldis Arnicans and Edgar Dupats – controls the whole group through a Cyprus company, Tirona Limited.
Boyko is not the official owner of Tirona Limited. The beneficial owner of 49 per cent is his 75 year-old relative, Vera, with the two Latvians Arnicans and Dupats taking equal parts of the remainder. These men are well-connected. In 2014, Dupats married the daughter of former Latvian prime minister Andris Skele, a local ex-oligarch with a reputation similar to Silvio Berlusconi. Arnicans is also connected with one of Skele’s family businesses.
But Boyko’s elderly relative does not appear to be setting up her own lending group. According to a prospectus filed by 4finance to the Irish stock exchange in 2013 “Tirona is part of Finstar Financial Group“ which is “ultimately beneficially owned by Mr. Oleg Boyko.”
The Russian billionaire restructured the fast loans empire, establishing a 4finance Holding S.A. in Luxembourg. From here, he started issuing bonds which financed its expansion.
In 2013, the Latvian subsidiary issued 170 million USD bonds on the Irish Stock Exchange (ISE), followed by its Luxembourg subsidiary on the bourses of Ireland, Stockholm and Frankfurt. Interest rates on this money, which Boyko’s firm needed to pay back on his bonds, were between 11 and 13 per cent.
A solution was found in Malta with its lax taxation system. 4finance S.A. Luxembourg branch founded its Maltese branch 4finance Malta Ltd in and transferred the majority of the borrowed money to the new company.
These are a relatively high for bonds – but nowhere near the 700 per cent demanded of the firm’s payday loan customers
Additionally, a 4finance group chart from reveals that the Luxembourg company is providing loans to its affiliates in different countries and then attributing loan receivables to the Malta branch. In other words, to cover the costs of the interest rates from the bonds, Boyko’s companies are lending money to themselves. These are online payday TN called ‘intercompany loans’.