Russia was Added to the Amended European Black List of Countries for Tax Purposes

At February 14, 2022, the European Council has updated its so-called Black List of ‘non-cooperative jurisdictions for tax purposes’. Inter alia, Russia was added to this list among several other countries.

What is the EU Tax Black List?

The Council has established a set of criteria to evaluate different jurisdictions regarding their fair taxation and tax transparency regimes. These criteria are outlined in Annex I of the Council Conclusions on the “Criteria and process leading to the establishment of the EU list of noncooperative jurisdictions for tax purposes” no. 14166/16 dated November 8, 2016 (“Council Conclusions”). The Council examines these jurisdictions twice a year, with the next review planned for October 2023. This particular team’s document (Annex II to the Council Conclusions) highlights the countries who have taken further steps toward sound tax policies or cooperation. The Council is advised by the Code of Conduct Group, which keeps track of taxation measures implemented in each Member State.

Adding a new country to the list means that this country either did not engage in a constructive dialogue with the EU or failed to meet the required tax governance reforms. These reforms aim to comply with international standards, addressing issues of tax transparency and fair taxation. The Code of Conduct Group – part of the EU Council body – is collaborating with FHTP (Forum on Harmful Tax Practices) to promote global tax good governance.

Why Was Russia Included in this List?

Specifically, Russia was added to this list as it failed to comply with so-called Criterion 2.1 of the Council Conclusions, namely, that:

“the jurisdiction should have no preferential tax measures that could be regarded as harmful according to the criteria set out in the Resolution of the Council and the Representatives of the Governments of the Member States, meeting within the Council of 1 December 1997 on a code of conduct for business taxation”.

Russian regulation that was considered as harmful is a February 25, 2022 (effective since March 25, 2022) and later amendments to Art. 24.2. of Russian Tax Code. These amendments extend the lower corporate income tax rate to Russian, in addition to the foreign, companies (so-called “International Holding Companies”) registered in Russian special administrative regions: Oktyabrsky Islands, and Russky Island.

What Tax Consequences Does It Have?

The fact that Russia was included in the EU Tax Blacklist may be relevant for the European counterparties of Russian businesses, as well as to the European beneficiaries of Russian businesses. Russia being included in this list limits the amount of certain incentives and preferences available within EU law and tax practice.