Representatives of the Ministry of Finance of the United Kingdom, Germany and the USA announced the suspension of the exchange of tax information with the Russian Federation.
The official website of the UK Government notes that the restriction is been in effect starting from April 17, 2022 and is applied to the exchange of tax information both within the framework of the Convention on Mutual Administrative Assistance in Tax Matters and within the framework of the Double Tax Treaty (DTT) concluded with Russia.
For Russian business, such a change means the termination of the exchange of financial information according to the Common Reporting Standard as part of the automatic exchange of cross-country reports, which was stopped back in 2019, and on request (Exchange of Information on Request).
Previously, the exchange of information on request allowed the bodies of the Federal Tax Service of the Russian Federation to receive information from foreign supervisory authorities during inspections. The purpose of obtaining information is to confirm the possibility of using tax preferences in accordance with the DTT. Now such an operation cannot be carried out, and during inspections, the bodies of the Federal Tax Service will have to request information directly from the Russian taxpayer – a subsidiary of the British group.
In addition, the number of British organizations recognized as controlled foreign companies (CFC) in the Russian Federation may increase, since the conditions that exempt them from such status cease to be applied and now it will be necessary to submit reporting to check the conditions on a general basis. Also, for organizations recognized as the CFC, the exemption from profits tax in accordance with clause 7 of article 25.13-1 of the Tax Code of the Russian Federation will also not be applied.
The termination of the exchange of tax information was reported by representatives of the German financial departments. In addition, the country will no longer compensate for the income tax of Russian citizens and firms that are registered with the financial departments of the country, which will affect the ability to avoid double taxation.
A similar decision was announced by the USA Tax Administration on April 5 of this year. Now the bodies of the Federal Tax Service of the Russian Federation will not be able to receive information from foreign authorities in order to exchange information to facilitate tax collection within the country and ensure compliance with tax legislation in both countries. However, this does not mean that residents of the Russian Federation are exempt from liability for non-disclosure of information and non-payment of taxes.
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