A new list of states and territories providing preferential tax regime and (or) not providing for disclosure and provision of information on financial transactions (offshore zones) will enter into force on 1 July 2023¹.
51 jurisdictions have been added to the updated list, including EU countries (Belgium, Czech Republic, Estonia, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, the Netherlands, Poland, Portugal, Spain, etc.), the United Kingdom, the United States, Canada, Japan.
| The expansion of the offshore jurisdictions “blacklist” does not mean the termination or suspension of Double Tax Treaties (hereinafter, the DTTs). Consequently, such a list does not affect the treatment (scope of possible benefits) of withholding tax on the income paid from Russia, the rules for determining permanent establishment and other procedures under the DTT. The DTT still takes precedence over the Russian Tax Code (hereinafter, the RTC) and the “blacklist” formed in relation to the RTC. |
How the presence of a country/territory on the “blacklist” affects the corporate profit tax on the main types of transactions under the RTC?
|
Type of income |
Effect on corporate profit tax |
|
Dividends |
It is not allowed to apply the 0% rate when taxing dividends received by a Russian company from a foreign company located in an offshore zone (Article 284(3)(1) of the RTC) |
|
Interest |
No effect (in general) |
|
Royalty |
No effect (in general) |
|
Income on sale of shares |
It is not allowed to apply the 0% rate on income from the sale by a Russian company of shares of a foreign company located in an offshore zone (Article 284(2)(4) of the RTC) |
|
Donation of property (property rights) |
It is not allowed to apply an exemption from corporate profit tax on income in the form of property (property rights) received by a Russian company from an offshore subsidiary (Article 251(1)(11) of the RTC) |
|
Contribution to share capital/property |
No effect |
|
CFC income |
The profits of active foreign holding and subholding companies are not exempt from taxation if the place of presence (registration) of such foreign companies is included in the list of offshore zones |
In addition, in relation to transfer pricing, any transactions with offshore companies are treated as transactions with related parties, while transactions with offshore zone residents are recognised as controlled when the amount of income/expenses for the year exceeds 120 million rubbles (clause 3 of Article 105.14 of the RTC).
Marillion experts are ready to provide you prompt support on the matter. Please kindly contact us for more detailed clarifications regarding the up-to-date agenda.
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¹ Order of the Ministry of Finance of the Russian Federation N 86n of 05.06.2023 “On Approval of the List of States and Territories Providing a Preferential Tax Regime and (or) Not Providing for Disclosure and Provision of Information in Conducting Financial Transactions (Offshore Zones)”
