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Tax Flash Report by PwC experts CFC rules: over 100 jurisdictions land on N ovember 2015 / Issue No. 35 FTS³blacklist´ In brief The Russian Federal Tax Service (FTS) has released for public discussion a so-called³blacklist´of those countries and jurisdictions that the FTS deems not to have provided proper exchange of tax information with the Russian 1 tax authorities . Certain provisions of Russia's controlled foreign company (CFC) legislation make reference to such a list (e.g. tax exemptions for CFC profits in Russia). The business community had been expecting that the FTS list would more or less match the list developed by the 2 MinFin , which encompasses 40 countries (the zero profits tax rate cannot be applied to dividends received from the listed countries). However, the FTS list has turned out to be three times longer than the MinFin's list and encompasses even such jurisdictions as United Kingdom, Switzerland, Austria and Brazil (see Appendix 1). The document is now at the public discussion stage. We hope that the FTS will accommodate the needs of the business community by reducing this list at least for the initial years of applying the CFC rules (the list may be reviewed on an annual basis). In detail Please note that Article 25.13-1 of the Russian Tax Code (RTC) describes situations when CFC profit is tax exempt in Russia. In total, there are eight such situations.

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• Publié par: les-crises
• Publié le: 12 novembre 2015
• Nombre de lectures: 7 904
• Langue: English

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Tax Flash Report by PwC experts CFC rules: over 100 jurisdictions land on November 2015 / Issue No. 35 FTS“blacklist”

In brief The Russian Federal Tax Service (FTS) has released for public discussion a so-called“blacklist”of those countries and jurisdictions that the FTS deems not to have provided proper exchange of tax information with the Russian 1 tax authorities . Certain provisions of Russia's controlled foreign company (CFC) legislation make reference to such a list (e.g. tax exemptions for CFC profits in Russia).

The business community had been expecting that the FTS list would more or less match the list developed by the 2 MinFin , which encompasses 40 countries (the zero profits tax rate cannot be applied to dividends received from the listed countries). However, the FTS list has turned out to be three times longer than the MinFin's list and encompasses even such jurisdictions as United Kingdom, Switzerland, Austria and Brazil (see Appendix 1).

The document is now at the public discussion stage. We hope that the FTS will accommodate the needs of the business community by reducing this list at least for the initial years of applying the CFC rules (the list may be reviewed on an annual basis).

In detail

Please note that Article 25.13-1 of the Russian Tax Code (RTC) describes situations when CFC profit is tax exempt in Russia. In total, there are eight such situations. Three of them are inapplicable, however, if a CFC is permanently domiciled in a country that does not ensure tax data sharing with Russia. This means that the following exemptions are inapplicable if a CFC is on the FTS blacklist: CFC has a high effective tax rate in its home jurisdiction (at least 75% of the average weighted Russianthe rate); the CFC is a bank or insurance company operating under its personal law based on a licence or other special authorisation to carry out banking or insurance activity; the CFC is an issuer of marketable bonds, a company authorised to earn interest income, or a company to which relevant rights and obligations have been assigned. The blacklist does not affect other tax exemptions for CFC profit (e.g. if a CFC is an active company or participates in minerals production projects, with certain nuances). The FTS blacklist was expected to include traditional offshore zone jurisdictions, similar to the MinFin's already existing blacklist, which covers 40 jurisdictions (e.g. Beliz, the British Virgin Islands, the Cayman Islands, and others). The Russian business community, in particular, had assumed that the profits of companies under their 1 http://regulation.gov.ru/projects#npa=41221 2  Russian Federation Ministry of Finance Order No. 108n of 13 November 2007 "On Approving the List of Countries and Territories That Provide a Beneficial Tax Regime and/or Do Not Stipulate the Disclosure and Submission of Information When Conducting Financial Transactions (Offshore Zones)"

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control, which are not domiciled in such traditional offshore zones and pay relatively high profits tax, would be tax exempt in Russia under the CFC rules. However, the FTS list has turned out to be three times longer that the MinFin's list and encompasses137 jurisdictions (see Appendix 1), including, for example,United Kingdom, Switzerland, Austria, Brazil and other countries. The takeaway Many taxpayers have assessed their tax liabilities based on the expectation that foreign companies and structures under their control are not on the blacklist and that the profits of such entities earned since 2015 would be tax exempt in Russia under the CFC rules. However, as noted, the FTS blacklist has proven to be quite extensive. Thus, taxpayers should review their foreign assets to determine whether there are any other grounds for taking Russian tax exemptions on their CFCs domiciled in jurisdictions on the FTS blacklist. Please note that under the tax amnesty (see Tax Flash Report No. 17, May 2015), movable property located in a country that does not ensure tax data sharing with Russia should be returned to Russia. So, there is a probability that the FTS blacklist may also cover this provision of the amnesty. We can only hope that FTS blacklist will be reduced. We urge you to actively take part in the public discussion of the FTS blacklist, which runs through 6 November.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

Tax Flash Report by PwC experts

Appendix 1 Listofcountries and territories that do not ensure proper tax data sharing with the Russian Federation:

Countries

Abkhazia Austria Angola Principality of Andorra Antigua and Barbuda Afghanistan The Bahamas Bangladesh Barbados Bahrain Belize Benin Bolivia Bosnia and Herzegovina Brazil Brunei Burkina Faso Burundi Bhutan Vanuatu Great Britain East Timor Gabon Haiti Guyana Gambia Ghana Guatemala Guinea Guinea-Bissau Honduras State of Palestine Grenada Georgia Djibouti Dominica Dominican Republic Congo Zambia Zimbabwe Israel Jordan Iraq Yemen Cape Verde Cambodia

Territories

1.Anguilla 2.Aruba 3.Bermuda 4.British Virgin Islands 5.Gibraltar 6.People's Republic of China: Hong Kong Special Administrative Region 7.People's Republic of China: Macao Special Administrative Region 8.Union of the Comoros: Island of Anjouan 9.Malaysia: Labuan Island 10.Montserrat 11.Curacao (Dutch part) 12.Republic of Niue 13.Cayman Islands 14.Cook Islands 15.Turks and Caicos Islands 16.Separate administrative unit of the United Kingdom of Great Britain and Northern Ireland: Isle of Man 17.Separate administrative units of the United Kingdom of Great Britain and Northern Ireland: Channel Islands (the islands of Guernsey, Jersey, Sark and Alderney) 18.Saint Martin (Dutch part)

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47.Cameroon 48.Kenya 49.Kiribati 50.Colombia 51.Comoros 52.Costa Rica 53.Cote d'Ivoire 54.Laos 55.Lesotho 56.Liberia 57.Lebanon 58.Lichtenstein 59.Mauritius 60.Mauritania 61.Madagascar 62.Malawi 63.Maldives 64.Malta 65.Marshall Islands 66.Mozambique 67.Monaco 68.Myanmar 69.Nauru 70.Nepal 71.Niger 72.Nigeria 73.Nicaragua 74.United Arab Emirates (UAE) 75.Oman 76.Pakistan 77.Palau 78.Panama 79.Papua New Guinea 80.Paraguay 81.Peru 82.Republic of the Congo 83.Rwanda 84.El Salvador 85.Samoa 86.San Marino 87.Sao Tome and Principe 88.Swaziland 89.Seychelles 90.Senegal 91.Saint Vincent and the Grenadines 92.Saint Kitts and Nevis 93.Saint Lucia 94.Solomon Islands 95.Somalia 96.Sudan 97.Surinam 98.Sierra Leone 99.Tanzania 100.Togo 101.Tonga 102.Trinidad and Tobago 103.Tuvalu 104.Tunisia 105.Uganda 106.Uruguay 107.Federated States of Micronesia 108.Fiji 109.Central African Republic 110.Chad 111.Switzerland 112.Ecuador 113.Equatorial Guinea

114. 115. 116. 117. 118. 119.

Eritrea Estonia Ethiopia South Ossetia South Sudan Jamaica

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