Approval of the “black list” of countries for country-by-country reporting purposes

18 January 2024
Tax Messenger
Order No. ED-7−17/915@ of the Federal Tax Service ("FTS") of 1 December 2023 ("the Order"), which establishes a list of states (territories) which do not exchange country-by-country ("CbC") reports on a regular basis ("the List"), was published on 11 January 2024.

The Order takes effect from 22 January 2024.

The approved List includes 21 states and 1 territory which should carry out the automatic exchange of CbC reports but systematically fail to do so. Specifically, the List includes the following states (territories): Australia, Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovenia, Spain, Sweden, and Bermuda.
Consequences for taxpayers

From the effective date of the Order the FTS will have legislative grounds to request CbC reports directly from Russian members of foreign multinational enterprise groups ("MNE groups") via the "secondary filing" mechanism owing to the inability of the FTS to obtain CbC reports prepared by the ultimate parent entities ("UPEs") of those MNE groups via the automatic exchange with the tax authorities of countries included in the List.

At present, there is no further guidance as to the reporting periods in relation to which the List will apply. In particular, it remains unclear whether the List can be applied retroactively, meaning that there is a risk that the FTS will be able to request CbC reports from Russian members of foreign MNE groups in relation to past reporting periods for which CbC reports have not been received through the automatic exchange with the tax authorities of relevant countries in the List.

Uncertainty also remains over the amounts of fines applicable to CbC reports which may be requested by the FTS after 1 January 2024 for past reporting periods. In particular, there is a risk that, in light of the Tax Code amendments effective from 1 January 2024, failure to submit a CbC report under the "secondary filing" mechanism for a past reporting period may result in the imposition of a fine of 1,000,000 roubles.

You can read more about the implications of the List and the questions remaining over its application in our previous alert.

It is important to note that, upon receiving a request from the FTS, a taxpayer must prepare and submit a CbC report within three months of the receipt of that request in electronic format in accordance with the requirements for the preparation of the CbC report XML schema which are established by Order No. MMV-7−17/123@ of the FTS of 6 March 2018.

In view of the above, we recommend that Russian members of MNE groups:

  • Carefully analyse the provisions of the Order to determine whether the UPEs of the MNE groups of which Russian taxpayers are members are residents of foreign states (territories) included in the List;
  • Contact the UPEs of foreign MNE groups in advance to discuss the respective matters and obtain CbC reports prepared in the tax jurisdictions of the UPEs;
  • Collect additional information which is missing in the UPE’s CbC report and is required for successful preparation and submission of the CbC report to the Russian tax authorities via the "secondary filing" mechanism;
  • Proactively prepare a CbC report in XML format in accordance with Russian requirements that are substantially different from the requirements of other jurisdictions in order to ensure the timely submission of the CbC report to the FTS.
How can B1 help?

  • Preparation and submission of Notifications of participation in an MNE Group in XML format in accordance with Russian requirements and assistance in the preparation and filing of Notifications of participation in an MNE Group in accordance with the requirements of foreign jurisdictions;
  • Preparation of CbC reports in XML format in accordance with Russian requirements and the requirements of foreign jurisdictions that do not participate in the automatic exchange;
  • Submission of a CbC report in XML format on the taxpayer’s behalf to the FTS, and assistance in submitting the CbC report to the tax authorities of foreign jurisdictions that do not participate in the automatic exchange; and
  • Methodological support on various issues related to CbC reporting, including assistance in communicating with the tax authorities.

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