Treasury doubles blacklist of tax havens

The Russian Ministry of Finance has added unfriendly countries to the list of offshore zones – countries that provide preferential tax treatment or do not provide information on financial transactions. Now this list includes states that are themselves the instigators of the global fight against money laundering, including the United States, Great Britain and the main countries of the European Union. This is how Russia responds to its inclusion in the EU black list. It is expected that the next step will be the suspension of the norms of double tax treaties with unfriendly states. Experts note that the expansion of the list will hit Russian companies with subsidiaries in the “new offshore” – first of all, zero rates on income from dividends or the sale of shares will become unavailable to them.

The Ministry of Finance has dramatically expanded the list of countries that provide preferential tax treatment or do not disclose information when conducting financial transactions. As follows from the published order of the department, from July 1, this list will be replenished with unfriendly countries, due to which it will more than double (from 40 to 91 states or territories).

If earlier the black list included mainly “classic” offshore companies (such as Panama, the British Virgin Islands, Seychelles), as well as the UAE (which the Russian Federation is ready to exclude after the introduction of income tax in this country), now the EU countries (including Netherlands, Cyprus, Luxembourg), UK, Switzerland, USA, Canada, South Korea, Singapore and Taiwan. As the Ministry of Finance explained to Kommersant, “countries that stopped exchanging information with Russia after being blacklisted by the EU” were added to the list.

Further, as Deputy Finance Minister Alexei Sazanov reported, it is planned to correct another similar list – countries that do not provide tax exchange with the Russian Federation (now there are 89 states and 16 territories) on similar grounds. In addition, an even more ambitious measure is being prepared – the suspension of the norms of agreements on the avoidance of double taxation (DTA) with unfriendly countries (see Kommersant of March 15). On June 14, the Ministry of Finance announced that it had already sent a corresponding proposal to the presidential administration. According to Aleksey Sazanov, it will not be the agreements themselves that will be suspended, but “separate articles” relating to the application of reduced or zero tax rates on income from dividends, interest and royalties. The possibility of offsetting tax, including personal income tax, will remain – thus, individuals will not be affected by the changes.

Yevgenia Volfus, a partner at Kept’s tax and legal consulting department, notes that jurisdictions have appeared on the list in which the nominal income tax rate is higher than in the Russian Federation, which confirms that this step is a response to the inclusion of the Russian Federation on the EU blacklist. According to MEF Legal Associate Partner Anna Zelenskaya, the point is not that “these countries have suddenly acquired the features of a low-tax jurisdiction, but that they have ceased to cooperate in the field of financial information exchange.” Rustam Vakhitov, an expert on international taxation, notes that, for example, “Great Britain and Canada have already announced the termination of automatic information exchange with the Russian Federation and have already been included in the relevant list of the Federal Tax Service – in this part, this is just a statement of fact.”

Lawyers agree that the decision of the Ministry of Finance will primarily affect Russian investors who own stakes in companies registered in countries from the black list. They will not be able to apply a zero rate on income in the form of dividends from subsidiaries in unfriendly countries or from the sale of shares (in the first case, the rate will be 13%, in the second – 20%), Evgenia Volfus explains. For the most part, says Natalia Kuznetsova, DRT’s tax and legal partner, the expansion of the list could hit Russian groups that were planning to exit assets in unfriendly countries but haven’t yet done so. In addition, transactions with companies from the countries on the list are treated as transactions with related parties, even if the counterparty is actually an independent company, and accordingly, they “may be recognized as controlled and subject to the requirement to prepare transfer pricing documentation.”

Anna Modyanova, director of tax practice at TeDo, notes that the inclusion of Cyprus, Luxembourg and other previously popular countries in the list will complicate the preservation of such companies in Russian business structures – this will strengthen the trend towards reorientation of business towards Russia and friendly jurisdictions. According to her, the exclusion from the list of countries with an acceptable level of taxation (for example, the UAE) would contribute to this process.

In general, Anna Zelenskaya notes, “the trend is understandable and supported by both sides”: operations with unfriendly countries are becoming more and more complex. “If the escalation reaches the suspension or even the abolition of DTT, then this will affect not only those who participate in the capital of companies from unfriendly countries, but also many individuals who are not corporately associated with them,” she argues. According to the managing partner of NSV Consulting Limited, Sergey Nazarkin, the inclusion of unfriendly ones in the list is “a prelude to the suspension of certain articles of the DTT”. In fact, he explains, the list is not a legal basis, but a formal pretext for such a decree, which will make it “more logical.” In this case, the expert adds, it will be not only about the non-application of zero rates to the income of Russian business, but also about the impossibility of using benefits by foreign organizations that own shares in Russian companies, even if they meet all the conditions for the actual receipt of income and economic presence. in the country of registration.

Evgenia Kryuchkova