On 14th February 2023, the EU Council adopted for tax purposes an updated list of non-cooperative jurisdictions. In addition to the British Virgin Islands, Costa Rica and the Marshall Islands, the Russian Federation has newly been added to the list.
For tax purposes, placing Russia on this list may also have consequences for many Czech companies, especially the following:
- CFC Rules Application
Following the Anti-Tax Avoidance Directive (ATAD), a special taxation regime is applied to foreign companies in which the parent company directly or indirectly holds more than 50% and which are without substantial economic activity and with a low effective rate of taxation.
However, stricter rules apply to all jurisdictions listed on the list of non-cooperative countries. The CFC rule applies automatically without testing the company’s activity or its rate of taxation; at the same time, profits from all activities of such a controlled company are subject to this regime, not only to listed passive income.
- DAC 6 Reporting obligation
If a Czech company records a deductible cross-border payment to a Russian affiliate (or to any other affiliate from countries on the list of non-cooperative jurisdictions), the characteristic hallmark of a cross-border transaction can be met. In such a situation, the company is obliged to report DAC 6. We would like to point out the fact that in this case, it is not necessary to examine the main benefit test.
This procedure will only be applied to new arrangements that arise from 14 February 2023.