Russia is included in the list of “black” tax jurisdictions of the EU: comments of the Ministry of Finance

LEGAL DIGEST, NEWS \ 06.03.2023

The Ministry of Finance of the Russian Federation provided explanations in connection with the inclusion of Russia in the list of jurisdictions that do not cooperate with the European Union on taxation issues.

On its official website, the Ministry of Finance of the Russian Federation informed that if Russia is on the list, the members of the European Union (EU) will have the right to apply enhanced tax control and take administrative and legal measures against the Russian state.

Administrative measures include:

• enhanced monitoring of certain transactions between EU residents and Russian persons;
• increased audit risks for EU taxpayers who use structures or transactions involving Russian persons.

Legal measures include:

• impossibility of accounting for the purposes of taxation by taxpayers-residents of EU countries of expenses incurred in transactions with Russian persons;
• application of the rules of controlled foreign companies (CFC) with respect to EU residents who could not apply these rules according to national legislation;
• application of withholding taxes on income paid to Russian persons that were previously exempt from taxation;
• restriction on the application for EU resident shareholders of the rules of exemption from taxation of distributable profit received from Russian entities.

Representatives of the Ministry of Finance explain that each EU member state can choose to implement at least one measure. At the same time, the simultaneous use of all methods of influence is not mandatory.

Please be reminded that the list of countries that do not cooperate with EU member states within the framework of taxation consists of two groups: Annex I and Annex II. Previously, the Russian Federation was listed in the second group, after which the EU authorities on February 10, 2022 included the country in the draft amendments to the second group and added it to the first one – Annex I.

In addition to Russia, countries such as the British Virgin Islands, the Marshall Islands and Costa Rica have joined the list. North Macedonia, Barbados, Jamaica and Uruguay were also excluded from the list. The specified list is updated twice a year, the next revision is scheduled for October 2023.

On issues relating to the application of tax legislation, please contact Acsour’s specialists.