Controlled transactions with low-tax jurisdictions from 120 million rubles

• A transaction with a foreign counterparty becomes controlled when the income from all transactions with one party for a calendar year exceeds 120 million rubles. Counting a single contract is pointless; everything is combined: goods, services, royalties, and loan interest.
• Effective January 1, 2026, Subclause 3, Clause 1, Article 105.14 of the Tax Code operates under two criteria simultaneously: the Ministry of Finance's list of offshore zones and a corporate income tax rate of 15% or lower in the counterparty's country. One of these is sufficient.
• The Ministry of Finance refused to publish a list of countries with low rates and shifted the burden of assessment to the taxpayer. This is confirmed by a regulatory act of a foreign state with a Russian translation.
• Cyprus, with a rate of exactly 15%, meets this criterion. The UAE has been excluded from the offshore lists, but remains under control due to its 9% rate.
• The two-year limitation on ordering a transfer pricing audit is no longer in place. The Federal Tax Service has the right to review transactions for three calendar years preceding the year of the audit decision.
• The fine for failure to submit documentation is 500,000 rubles, and for late notification, 100,000 rubles. For foreign trade transactions, accurate documentation does not exempt from liability for non-market pricing.

A transaction with a company in a low-tax jurisdiction becomes controlled when the total income from all transactions with this counterparty for a calendar year exceeds 120 million rubles. There is no need to prove interdependence—legislators have equated such transactions with related parties based on the counterparty's registration. And since the beginning of 2026, the range of such jurisdictions has expanded significantly: in addition to the Ministry of Finance's list of offshore zones, a second, much broader criterion has been added—a corporate income tax rate of 15% or lower in the counterparty's country. Both criteria apply simultaneously, and meeting either criterion is sufficient.

Why the 120 million ruble threshold is closer than most owners think

Many owners believe their transactions are far from the threshold because they rely on a single contract. The standard is structured differently, and this is precisely what the inspectorate most often bases its complaints on.

The threshold is calculated based on all income with one party for the year

Clause 9 of Article 105.14 requires adding up the income from all transactions with one party for a calendar year. A 70 million ruble equipment supply, 30 million ruble license fees, and 25 million ruble interest on an intra-group loan are not three separate events, but rather 125 million rubles and the obligation to report. Income is calculated using the accrual method, regardless of whether the funds have been credited to the account or not. A company using the simplified tax system is also not exempt from the standard: for them, the amount is determined by calculation according to the rules of Chapter 25.
A separate detail concerns loans. It's not the principal of the loan that's taken into account, but the accrued interest. This significantly raises the threshold for financing institutions, but it also means that a multi-year loan with accrued interest could explode in the most unexpected year.

The offshore zone list is no longer the only reference point

Until 2026, the logic was simple: check the Ministry of Finance's list and find a counterparty country. Now, checking the list only covers half the issue. The rule is built on an "and-or" premise: inclusion in the list of offshore zones approved by Ministry of Finance Order No. 86n, or a profit tax rate of 15% or lower.
A prime example is the UAE. Orders No. 187n and No. 188n dated December 22, 2025, excluded the Emirates from both offshore zones, opening the door to a zero dividend rate and exemptions for controlled foreign companies. But with a corporate tax rate of 9%, the UAE remains within the scope of controlled transactions under the second ground. Anyone who only read the news about being removed from the list risks not filing a notification. This hasn't made UAE companies any worse as a vehicle; reporting on them is simply retained in full.

Exactly 15% is already a qualifying tax

The wording of the standard is "equal to or below 15 percent." The threshold is included in the range, and this changes the landscape for a number of European jurisdictions.
Cyprus raised its corporate tax from 12.5% ​​to 15% effective January 1, 2026; the laws were published in the Official Gazette on December 31, 2025. The increase was intended to align with the global minimum, but under Russian logic, it had the opposite effect: a Cypriot company now clearly meets the criteria. The same applies to Gibraltar with its 15%, Mauritius, and Serbia. Below the threshold are Hungary with 9%, Bulgaria with 10%, Ireland with 12.5%, Liechtenstein with 12.5%, Georgia with 15%, and the entire classic offshore group with a zero rate.
Above the threshold are Singapore with 17%, Hong Kong with a base rate of 16.5%, the United Kingdom with 25%, Estonia with 20% on profit sharing, Kazakhstan with 20%, and Armenia with 18%. This doesn't mean such structures are automatically beyond control—interdependence and intermediary schemes have not been abolished—but one of the grounds for doing so is eliminated.

How to determine the rate and how to confirm it before an inspection

Here begins the most practical part, which is rarely discussed in detail. This provision refers the taxpayer to foreign legislation, and they must do this independently.

The Ministry of Finance refused to publish a list of countries.

In letter No. 03-00-08/5827 dated January 28, 2026, the agency was directly asked about a list of jurisdictions with a rate of 15% or lower. The answer was negative: the tax legislation of foreign countries is changing, and therefore publishing such a list was deemed inappropriate. The Ministry of Finance added that the Code does not contain provisions allowing for the unambiguous identification of the source of information on the established rate, including when multiple rates are in effect simultaneously.
The conclusion from the letter is clear: the taxpayer declares a transaction as controlled or uncontrolled based on their own judgment. Responsibility for this judgment is also theirs.

Which document will resolve the issue during an inspection?

The Ministry of Finance outlined a specific set of requirements for confirmation. This is a foreign state's regulatory legal act establishing the profit tax rate, adopted and published according to the rules of that country, in effect during the tax period in which the transaction occurred, with an indication of the official source of the text and a Russian translation.
Neither an extract from an audit firm's handbook nor a printout from a foreign state's tax service website formally corresponds to this. Such a file must be prepared once for each jurisdiction and updated whenever local legislation changes. Experience shows that compiling it within 30 days at the tax office's request is significantly more difficult than preparing it in advance.

Where the nominal rate diverges from the actual burden

A separate area of ​​uncertainty is countries with multiple rates. Hong Kong uses a two-tier system: 8.25% on the first HK$2 million of profit and 16.5% beyond that amount. Poland combines a basic 19% rate with a reduced 9% rate for small taxpayers. In Switzerland, the federal rate is 8.5%, and the total burden varies by canton and ranges from approximately 11.9% to 21%.
The standard refers to the established rate for corporate profits, not the effective burden of a specific counterparty. A more cautious approach is to focus on the basic rate of the general regime. However, there is no definitive answer yet regarding cantonal systems and two-tier scales, so the decision should be recorded in writing, with reasons, before filing a notice, rather than after receiving the request.

IT-OFFSHORE Expert Opinion
"Over the past year, we've analyzed dozens of structures where the owner was convinced they were beyond control. A typical situation goes like this: a trading company in a jurisdiction with a tax rate above 15% is operating smoothly, but in the chain there's an agent from a zero-tax jurisdiction who formally bears no risks and performs no functions. The transaction is considered controlled due to its intermediary status, and the threshold is calculated based on the final counterparty.
A second common scenario is calculating the threshold based only on product deliveries, excluding management services and royalties within the group. When we add up everything that happens between two companies over the course of a year, the picture changes in about half of the cases.
We recommend starting not by choosing a new jurisdiction, but by taking inventory: who your counterparties are, what the rates are in their countries, what amounts were transferred last year, and what of these exceeds 120 million rubles. This takes a few days and resolves most issues before they become expensive".

What happens after a transaction is recognized as controlled?

Recognizing a transaction as controlled does not in itself imply additional charges. It implies a set of obligations, and failure to fulfill each of them has its own price.

Notification due by May 20 and new sections of the form

The notification must be submitted by each Russian party to the transaction by May 20 of the year following the reporting year. The form is in effect according to Federal Tax Service Order No. ED-7-13/1088@ dated December 2, 2024, and is significantly more complex than the previous one. In addition to information about the transaction and the parties involved, it discloses the method used to determine whether the price corresponds to the market price, sources of information, and data on the value chain.
The last section was a surprise to many. It requires a description of how the price is formed throughout the entire chain to the end customer, essentially revealing the group's operating model to the inspectorate. Completing it in May using documents that no one had collected during the year is extremely difficult.

Transfer Pricing Documentation and 30-Day Response

Documentation is submitted within 30 days upon request from the Federal Tax Service. Starting in 2024, the request may arrive as early as three months after notification—automated selection is fast.
The content of the documentation has also changed. Now, it includes information on the foreign counterparty's income and expenses, number of employees, profit or loss, and the value of fixed and intangible assets for the transaction period, along with financial statements. Obtaining this data from an independent supplier is nearly impossible; from a related company, it's a matter of negotiation. It's at this stage that the extent to which your foreign structure is truly manageable becomes clear, and this issue should be addressed at the company registration stage, not upon receipt of the request.

Secondary Adjustment: When Price Differences Turn into Dividends

A mechanism that's often overlooked in popular articles. If the price in a transaction with a foreign related party differs from the market price, the difference is recognized as income for the foreign counterparty and is treated as dividends. The date of receipt of income is considered the last day of the calendar year in which the transaction was completed, and the Russian company acts as the tax agent.
There is a solution. The secondary adjustment will not apply if the foreign entity returns this amount to the Russian taxpayer's account in a Russian bank before the tax payment deadline for the relevant period. A later refund is also possible—before the audit decision is made—but then interest for the use of third-party funds must be included in the income at a rate of 1/300 of the Bank of Russia key rate for each day. This option is only available if the foreign company is prepared to act promptly, and in reality, not everyone has this option.

The cost of error and the depth to which the Federal Tax Service can return

Penalties in this area have increased significantly in recent years, while procedural restrictions for the inspectorate have, conversely, been weakened.

Fines against which documentation does not protect

Failure to submit a notification on time or providing inaccurate information in it—100,000 rubles under Article 129.4. Failure to submit documentation for a specific transaction or a group of similar transactions—500,000 rubles under paragraph 3 of Article 129.11.
The most significant penalty concerns prices. For domestic transactions, the fine for failure to pay taxes due to a non-market price is 40% of the arrears, and accurate documentation exempts from this penalty. For foreign trade transactions, the fine is determined in the amount of the unpaid tax plus the amount of the tax base adjustment, but not less than 500,000 rubles, and no exemption is provided with the availability of documentation. In this case, documentation protects not against the fine, but against the adjustment itself—it substantiates the market value of the price and removes the basis for additional assessments.

The two-year limitation on ordering an audit is no longer in effect

Previously, a decision on a transfer pricing audit could be made no later than two years from the date of receipt of the notification. Federal Law No. 39-FZ of February 26, 2024, eliminated this time limit.
In 2026, the cassation court upheld the approach in the UMMC case: the two-year limitation was qualified as a procedural rule applicable as amended on the date of the audit decision, not the date of filing the notification. The waiver of the time limit was not deemed to worsen the taxpayer's position. Clause 5 of Article 105.17 applies: transactions concluded within three calendar years preceding the year in which the decision was made are subject to audit. This means that a notice filed several years ago is not automatically closed by statute of limitations, and it makes sense to keep documentation on significant transactions in a prepared form longer than is customary.

How to build a structure so that control remains manageable

Controllability is not a death sentence or a sign of violation. It's a reporting regime that can either be accepted and maintained, or changed by restructuring the perimeter. Both approaches are viable; the question is in the calculation.

Perimeter inventory as a first step

It's worth starting with a table that summarizes for each foreign counterparty the country of registration, country of tax residence, local income tax rate, annual turnover for all types of transactions, and the presence of intermediaries or intermediaries in the chain. A separate line item is for foreign structures without a legal entity, because they are also used to assess the residency of participants and beneficiaries.
Such a table usually reveals two things: counterparties that the accounting department didn't consider low-tax, and amounts that, when broken down by contract, appeared innocuous. After this, the discussion of the structure becomes more focused.

Selecting a jurisdiction based on the rate, not just the cost of service

If turnover in a specific area consistently exceeds 120 million rubles, the rate in the counterparty's country ceases to be a secondary parameter. The difference between a jurisdiction with a 15% rate and one with a 17% rate may seem insignificant on paper, but in practice, it determines whether you prepare documentation annually and disclose your value chain.
This is not an argument against low-tax solutions. For holding, licensing, and financial functions, a low rate still provides an effect that offsets compliance costs. However, for operational trade with a Russian component, a jurisdiction with a rate above the threshold often proves more secure overall. We calculate both scenarios in monetary terms and show the difference before the company is registered, along with the selection of a bank and payment infrastructure, because the account and rate together determine the viability of the scheme.

What We Do

IT-OFFSHORE has been working with international structures since 2009, guiding clients from registration to document delivery by courier, throughout the entire ownership process. We analyze the current transaction perimeter, prepare rate confirmations for counterparty jurisdictions in a format consistent with the Ministry of Finance's position, assess the risk of reclassifying intermediaries, and propose restructuring options if the current configuration is more expensive than the alternative.
We do not promise to remove transactions from control where the law does not allow it, and we speak directly when the only reasonable course of action is to accept the status of controlled transactions and establish a normal documentation process. If you need an in-person meeting, we have a hotline in Moscow at +7 495 001-22-29, and you can also discuss the structure remotely—contact us conveniently via any channel, including instant messaging. Additionally, ready-made companies with open accounts are available when a solution is needed quickly, and licensing is available if the business requires regulated status.