Russian Federal Tax Service Excludes 9 Countries From The Offshore Blacklistkwsmedeveloper
On 8 February 2019, Russian Federal Tax Service issued an order confirming the list of states that do not have tax information exchange arrangements with the Russian Federation. The list is available on the official online legal information portal. The new document, which commenced on 19 February 2019, will replace the corresponding order that has been in effect since 2018.
The following 9 states and territories are excluded from the List under the new order: Belize, Brazil, Liechtenstein, Monaco, United Arab Emirates, Seychelles, Uganda, Saint Kitts and Nevis, along with two British offshore jurisdictions which include the Isle of Man and Guernsey. The updated List now has 100 states and 18 territories.
These areas are now ready to share or have been exchanging information with the Federal Tax Service of Russia.
The List is created to back the application of Russia’s controlled foreign company (CFC) rules. In particular, where a CFC’s jurisdiction is included in the List:
- The CFC’s profit cannot be exempted from taxation in Russia on a number of the grounds specified in Article 25.13-1 of the Tax Code
- An auditor’s report that does not contain a negative or unfavorable opinion or a disclaimer of opinion is required for the CFC’s profit to be calculated based on financial statement data
For the most of countries declared, their exclusion from the list will not change the applicability of relevant exemptions or the method of calculation of profits (losses) of CFCs situated therein, given that, moreover not being on the List, a current tax treaty is required with the jurisdiction concerned. Of the countries that have been omitted, only Brazil and the UAE have tax treaties with Russia.
What are the implications?
The removals of the above mentioned regions from the List signifies that the Russian Federal Tax Service has now made adequate tax information exchange arrangements with the 10 states and territories in question. Last year in 2018, the British Virgin Islands (BVI) and the Republic of Korea were excluded from the List.
The lessening of the number of jurisdictions “blacklisted” by the Russian Federal Tax Service indicates a general trend towards the greater exchange of tax information among states.
Taxpayers should frequently observe changes in the list of countries that do not have tax exchange information arrangements with Russia. Future Alerts will continue to inform changes in this area.
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