The Russian Ministry of Finance has approved a new List of offshore zones

Pepeliaev Group advises that Order No. 86n of the Russian Ministry of Finance dated 5 June 2023 has been published. It significantly expands the List of states and territories providing a preferential tax regime and/or not providing for disclosure and the provision of information during financial transactions (offshore zones).

Starting from 1 July 2023, offshore zones will include 91 states and territories instead of 42 provided for by the List currently in effect. The List has been extended to include foreign states and territories engaged in hostile actions towards the Russian Federation, Russian legal entities and individuals. However, for example, the United Arab Emirates remains in the List.

What it means for Russian taxpayers

  • Russian companies receiving dividends from foreign companies which are located in the states and territories included in the List will not be able to apply the 0% rate to such dividends (article 284(3)(1) of the Russian Tax Code);

  • transactions with foreign companies located in the states and territories included in the List may become controlled even where the parties are not related (article 105.14(1)(3) of the Tax Code);

  • care should be exercised when obtaining free of charge any property or property rights from foreign members located in the states and territories included in the List since, according to the general rule, such transactions will not qualify for an exemption from tax as provided for by article 251(1)(11) of the Tax Code;

  • certain particular aspects emerge in relation to the taxation of controlled foreign companies and global holding companies.

What it means for Russian financial institutions

Certain Russian financial institutions are prohibited from having, directly or indirectly, members (shareholders) from such countries in their ownership structure. Such ban, either fully or partially, is set out, for example, for:

  • insurance companies and branches of foreign insurance companies in Russia,

  • pension funds,

  • microfinance organisations,

  • investment fund management companies,

  • operators of a digital financial assets exchange,

  • operators of investment platforms,

  • operators of financial platforms,

  • forex dealers,

  • management companies of special-purpose vehicles,

  • clearing organisations,

  • trade organisers,

  • special-purpose depositories,

  • special-purpose financial institutions, and

  • special-purpose project financing companies.


Where there are no special clarifications on the part of the Bank of Russia and/or where no clarifications have been introduced to industry-specific laws regulating the activities of the relevant financial institutions, the need may arise to change the ownership structure of those institutions which comprise persons from such jurisdictions.

These changes may also affect the activities of organisers of gambling as well as lottery operators.

For credit institutions, there is a separate list[1] to be approved by the Bank of Russia for correspondent accounts to be opened, as well as to assess the transparency of the ownership structure of credit institutions. This list is not affected by the changes.

Russian legislation also contains other restrictions/bans for Russian companies in their relations with members from ‘offshore zones’. 

What to think about and what to do

Such significant extension of the List of offshore zones may cause tax issues to Russian taxpayers who continue doing business with foreign companies from these jurisdictions. We assume that a significant part of the issues will relate to transfer pricing.

Financial institutions should analyse the ownership structure to determine whether it comprises persons which do not comply with the requirements of industry-specific legislation relating to the members (shareholders) of such companies, and whether there are restrictions on transactions with membership interests (shares) of such institutions as established within the framework of special economic measures.

We believe that, if the ownership structure is not brought in line with legal requirements, restrictions may be imposed on persons from such jurisdictions exercising their rights as members (shareholders) of the relevant financial institutions. To complete the above operations, the consent of a Governmental Board may be required.

Help from your adviser

The experts of Pepeliaev Group are ready to provide assistance in the practical application of the new rules, for instance, in analysing issues relating to transfer pricing (assistance in determining the aggregate thresholds for controlled transactions, providing recommendations as to how to draft notifications of controlled transactions, and preparing documentation on transfer pricing).

We will readily analyse the possible influence of the new rules on the need to change the ownership structure of specific financial institutions and will check any obstacles that members from ‘offshore zones’ create for the activities of Russian companies in each case.

Translated by the Translation Department of Pepeliaev Group.

[1] Guideline No. 1317-U of the Bank of Russia dated 7 August 2003 “On the procedure for authorised banks to establish correspondent relations with banks which are non-residents and are registered in states and territories granting a beneficial tax regime and/or not providing for the disclosure and submission of information when financial transactions are performed (offshore zones)”

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