Putin Administration Pulls Tax Stunts on Bucharest Building

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Several sources that DDS journalists have contacted claim that the Russian Federation is pulling stunts and taking advantage of the status of a commercial building in Bucharest, in order to avoid paying taxes. The Russians claim the building, which is rented for millions of euros for commercial activities, has a diplomatic status. What does the Ministry of Foreign Affairs say?

24 years ago, the Russian Federation had documents drawn up for the largest commercial building it owns in Bucharest, situated at 4-6, Charles de Gaulle Square.

The building has a total area of 5,500 square meters, while the associated land is bigger than 4,200 square meters.

The main building was designed in the 1930s by Marcel Iancu, one of the most important Romanian architects of the 20th century.

Three architects from Bucharest have conducted a historical survey and intended to classify the building as a historical monument, but the initiative never materialized.

During the interwar period, the building was the headquarters of a construction enterprise, and in 1945 it became the property of the Union of Soviet Socialist Republics (USSR).

After the dissolution of the Soviet Union, the building was transferred in the patrimony of the Presidential Administration of the Russian Federation. The document was signed in 1997 by Vladimir Putin himself, who was working at that time at President Boris Yeltsin’s chancellery.

After the year 2000, the presidential patrimony outside Russia was transferred to the administration of a state company – „FGUP Goszagransobstvennost”.

It was around that same time that Russia gained ownership of the CDG building. This was made by means of its Romanian Trade Agency.

Russia however did not have the right to take sole ownership of this property, according to law experts. In keeping with international laws, any property that USSR owned abroad should have been shared between Russia and all the other successor countries, including Ukraine.

The story of the USSR succession, in short

In 1991, 14 of the 15 member states left the USSR – which ceased to exist officially. In this new context, Russia considered itself to be the rightful heir of the Soviet Union.

In 1993, the president Boris Yeltsin signed a decree by means of which the Russian Federation was self-proclaimed sole successor of the USSR and inheritor of all the properties that USSR owned abroad.

In order to be recognized at international level, the decree had to be ratified by each and every country that used to be part of the USSR. Most republics approved it.

In 1994, Russia also signed a bilateral treaty with Ukraine, but the document was not ratified by the Kyiv Parliament. The issue of the USSR legacy was therefore left unsettled between the two countries. 

In 2000, the CDG building in Bucharest was registered at the Land Office with Russia’s name. The Land Book judge was provided with the 1993 decree signed by Yeltsin.

In order to be the sole party to take over the CDG building, Russia was supposed to provide the Land Office the agreements signed with the former republics of the USSR, by means of which such countries gave up their rights of inheritance in Russia’s favor. Thus, the land registration with Russia’s name can be cancelled at any time by a court of law, according to international law experts.

In 2001, Romania made a mention in the Land Book that it does not recognize the unilateral take-over of the CDG building by the Russian Federation.

After having taken the building that used to belong to the USSR, Russia has started to speculate on the provisions of an international convention with the purpose of avoiding paying taxes on the land and the building, as several sources have confirmed.

Specifically, this is about the Vienna Convention (1961) on diplomatic relations. According to this document, diplomatic missions benefit from certain privileges, including fiscal privileges, such as exemption from paying the tax on land and buildings.

The prerequisite is that the real estate be used exclusively for the execution of the mission’s activities, as per the Vienna Convention (articles 23 and 41).

Russians consider that the CDG building has a diplomatic status and therefore it is exempted from tax, although it is used for other purposes, mainly commercial. Since 1990, the building has been depreciating constantly, having been covered in graffiti and taken over by homeless people. Even though it was not fit for living, it was used as a registered office for several companies, and it was rented for millions of Euros.

The middleman of the Russian Federation for the business conducted here was Boris Golovin, a former officer of the GRU – the military intelligence service of the Soviet army. Golovin is native of the Republic of Moldova and he is also a Romanian citizen.

In 2016, the building was rented for 10 years by Global Energy Investment, a company that was founded by Boris Golovin and his business partner, Horia Constantin Bejan – former manager within the Ministry of Industries.

Global Energy in its turn has sub-let it to the benefit of Duma Imob Development – this is a company owned by George Iorgovan, the son of the former Social-Democrat senator Antonie Iorgovan, who is the “father” of the first Romanian Constitution after the Revolution of December 1989.

Duma Imob has begun renovating the building starting with 2019, and then the building was leased piece by piece.

The biggest surface (1,500 sq. m) was rented by Hitman International, who wanted to open a luxury hotel in this space.

After the building was upgraded, Global Energy and Duma Imob entered a legal conflict. Golovin’s company has unilaterally terminated the sub-lease contract and demanded the evacuation of Iorgovan’s company from the building.

After Russia invaded Ukraine, Boris Golovin stepped down from Global Energy, and his place was taken by the businessman Dan Ciocea, from Galați, the owner of Hitman – the company who has established a hotel in the CDG building.

One important aspect of which Global accuses Iorgovan’s company is that Duma has breached the contract provision that stipulated it was forbidden to establish their registered office or agency office at the CDG building.

“The contract and the owner of the building (Russian Federation, by means of FGUP) forbid this and the relations with the owner are becoming tense during the execution of the contract, this is why the interdiction was also maintained in the contract signed with Duma”, argue the representatives of Global.

Duma claims the company has “temporarily” established its registered office at the CDG building so that they could sign contracts for utilities and lease contracts more easily.

The owner of Duma, George Iorgovan, has filed a criminal complaint at the Directorate for Investigating Organized Crime and Terrorism (DIICOT) against Dan Ciocea, Horia Constantin Bejan and Sorinel Voinea (the owner of a company who has rented a part of the building), claiming that they had taken over a 200-sq.m space (1st floor) in the CDG building and that they have posted a false sign for DIPLOMATIC CORPS.

Upon request from our journalists, DIICOT responded that a criminal in rem investigation was initiated for “illegal access to an informatic system” and “altering the integrity of informatic data”.

Last year, Sorinel Voinea declared for G4Media that the building “has the status of a diplomatic mission”.

„No search, no confiscation and no foreclosure can be enforced. The written consent of the head of the mission is necessary”, Voinea said, invoking article 22, paragraph 3 of the Vienna Convention.

The documents that the journalists have examined make no reference to the status of the CDG building. However, we have two important clues.

• The interdiction for tenants to establish their registered office and agency office in the building.
• The tenants must make sure they do not perform any activities that might result in the “sequestration, the establishment of an auction, the mortgaging and/or encumbrance of the property by third parties, including central or local authorities”.

The main actors in this scandal claim that for the CDG building no tax on land and building is paid. 

We have tried to get an answer from the City Hall of Sector 1, but the local administration invokes fiscal secrecy, considering that this information is not of public interest. The officials did not even wish to confirm or deny if the CDG building exists in the database pertaining to taxes or if it is exempted from tax on the grounds of any legal provisions.

George Iorgovan, the owner of Duma, states that the Russian Federation should pay taxes, as the building “does not have a diplomatic status”.

“It is a building which belongs to the Russian state, but it does not have a diplomatic status. (…) If the representatives of the fiscal administration do not want to share this information, most likely no taxes are paid for the building. There is a certain feeling of fear within all institutions when this story about the Russian Federation is told”, Iorgovan said.

On the other hand, Boris Golovin, the representative of Russia in this deal, claims no tax should be paid. 

I know that, according to the Vienna Convention, no tax is paid for diplomatic properties. It’s the same for Romanians, who do not pay taxes in Moscow. (…) In keeping with international conventions, all countries in the world do the same. Private people do pay, but the situation is different when the state is involved”, Golovin said.

The former GRU officer also states that he has left the company a long time ago and that he moved to Brașov and no longer has any connections to Bucharest.

His business partner, Horia Constantin Bejan, was not available for an opinion.

DDS has tried to obtain an official standpoint from the Embassy of the Russian Federation in Romania, but no response was provided until this article was published.

About the building CDG 4-6, the Ministry of Foreign Affairs (MAE) clearly states the following: “We have no information that a foreign diplomatic mission is currently functioning at this address”. 

MAE emphasizes that the economic department of the Embassy of the Russian Federation in Romania can be found at the address 53 Paris Street. 

This is considered to be the place of the mission, including in the sense of article 23 of the Vienna Convention on diplomatic relations (Vienna, 1961) – the one pertaining to tax exemption. 

Bogdan Groșereanu