Russia officially considered tax haven by European Union

The EU’s Economic and Financial Affairs Council (ECOFIN) has updated the list of non-cooperative tax jurisdictions. On Tuesday, 14 February 2023, ECOFIN unanimously decided to extend the list to include British Virgin Islands, Costa Rica, Marshall Islands, and Russia.

The extended list will enter into force when published in the Official Journal of the European Union.

With Russia blacklisted, Polish taxpayers may have to comply with MDR requirements in relation to cross-border tax schemes with Russia.

Pursuant to Article 86a(1)(13)(a) of the Tax Code, a tax scheme includes, without limitation, a situation where a cross-border payment treated as deductible for tax purposes is made to a related party based in a tax haven mentioned in secondary legislation issued pursuant to Polish personal or corporate income tax statutes or on the EU list of non-cooperative tax jurisdictions (in this case that will be Russia).

Cross-border tax schemes are generally reportable within 30 days and the deadlines are not subject to suspension. It will thus be necessary to identify payments made to Russian-based related parties. Note that the reporting obligation does not depend on the amount paid (there is no materiality threshold and even minor amounts are reportable).

Note also that the EU list operates independently of Polish Finance Minister’s list of tax havens (published in regulations on the determination of countries and territories applying harmful tax competition in terms of corporate income tax or personal income tax). Putting Russia on the EU list has no impact in relation to tax legislation that refers to the Polish list.

If this issue pertains to your business and you are interested in our assistance, please contact us.

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