Transfer pricing: the impact of expanding the list of offshore jurisdictions on the obligations of taxpayers conducting transactions with residents of offshore zones

On July 1, 2023, the Order of the Ministry of Finance of Russia No. 86n of June 5, 2023, “On the Approval of the List of States and Territories Granting Preferential Tax Treatment and/or Not Requiring Disclosure and Provision of Information in Financial Transactions (Offshore Zones)” came into effect. The list now includes 91 offshore zones, including EU countries, the USA, Japan, Canada, Australia, and others.

Transactions of Russian organizations with residents of offshore zones are considered controlled if the total income of the parties to such transactions exceeds 120 million rubles per year. It does not matter whether the parties to the transaction are related.

Information about such transactions must be included in the Notification of Controlled Transactions, which must be submitted to the tax authorities (IFNS) each year no later than May 20 following the reporting year. In the event of a tax audit of controlled transactions, the taxpayer must submit documentation containing the information specified in the Tax Code of the Russian Federation regarding the specific transaction (group of homogeneous transactions) indicated in the tax authority’s request within 30 business days from the date of receiving the request.

For the purpose of preparing the Notification and Documentation on Controlled Transactions, Russian organizations need to take into account the significant expansion of the list of offshore zones in 2023. The list was expanded to include the following states and territories: