By Elena Fabrichnaya

MOSCOW (Reuters) – A U.S. sanctions authority delayed for months KFC’s exit from Russia this yr after commenting on an “exit tax” for departing overseas companies when the deal was on the cusp of completion, in keeping with the proprietor of the grasp franchise in Russia.

New calls for from Moscow initially delayed the departure of KFC eating places and led the U.S. Workplace of International Belongings Management, or OFAC, to get entangled, creating additional delays, in keeping with Sergei Levin.

Levin heads the authorized division at Unirest, which manages the previous belongings in Russia of Yum! Manufacturers (NYSE:), KFC’s U.S. mother or father firm. Yum! Manufacturers didn’t instantly reply to an emailed request for remark.

The delay gives one other illustration of how company exits have grow to be extra difficult as Russia has tightened restrictions. Executives say that navigating the foundations is turning into tougher.

Yum! Manufacturers is one among many corporations to exit Russia over Moscow’s actions in Ukraine, however its departure differed from that of rival McDonald’s (NYSE:) in that some KFC franchisees have been permitted to stay open and the menu was barely modified.

The U.S. Treasury declined to remark. It is OFAC workplace issued compliance steerage to the business concerning the exit tax within the type of FAQs, or steadily requested questions, on Feb. 24, 2023, whereas negotiations on KFC’s exit deal have been nonetheless ongoing.

Yum! Manufacturers in April finalised its exit from Russia, transferring grasp franchise rights to Good Service, a neighborhood franchisee led by businessmen Konstantin Kotov and Andrey Oskolkov. The deal included all its Russian KFC eating places, working system and the trademark for the Rostic’s model. The worth was not disclosed.

“The method of discovering a purchaser and agreeing the fundamental circumstances took a while,” Levin mentioned. “When the fundamental circumstances have been agreed, a rule appeared that the sale of shares needs to be agreed with the related (authorities) division.”

As soon as the consumers have been permitted, taking this new requirement into consideration, one other one appeared – the funds contribution termed an “exit tax” by Washington – Levin mentioned. Russia added that demand in December 2022.

“The closure was delayed once more, the proper process on paying the exit tax was agreed,” Levin mentioned. “It appeared that every one was agreed, all the pieces was transferring in direction of completion after which a overseas regulator appeared on the scene – OFAC.”

“Because of this, it took fairly a very long time to settle…we closed all the pieces efficiently in mid-April.”

Former KFC eating places started opening in April as Rostic’s, reviving a model born quickly after the collapse of the Soviet Union.

Levin added that Unirest hopes to finish the model transition from KFC to Rostic’s in 2024, with plans for 60% of the 1,200 eating places in Russia to be Rostic’s by end-2023.