Russia: Revised “blacklist” of countries; process for identifying shell companies, unjustified tax benefits

Russia: Revised “blacklist” of countries

Russian federal tax service revised the country “blacklist,” and effective 1 January 2018, the British Virgin Islands and the Republic of Korea will be removed from the list of those countries not sharing tax information. The blacklist comprises 108 countries and 18 territories.

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The tax service also as created an online tool that is intended to assist taxpayers in identifying which of their counter-parties could be shell companies. The service will be based on tax ratings to be assigned to each economic entity.

Draft legislation incorporating concept of unjustified tax benefit

Draft legislation concerning “unjustified tax benefits” proposes a new approach to determining when taxpayers are improperly reducing their tax liabilities. The legislation would provide that a reduction in tax liabilities would be improper if accomplished by misstating accounting or reporting or by ignoring the crucial tax doctrine—“priority of substance over form”. The non-payment of taxes by a taxpayer’s counterparty, some immaterial defects in compiling documents or the possibility of structuring a business or transaction differently (but with a greater resulting tax) would not be grounds for refusing deductions or expenses, if there are no other indications that a business transaction must be respected. The draft legislation provides that the tax service, by exercising tax control, would have the burden of proof that a reduction in tax liabilities by a taxpayer was unjustified.

 

Read a 2017 report [PDF 274 KB] prepared by the KPMG member firm in Russia

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