The inclusion of Russia on the list of non-cooperative jurisdictions is essential for Czech companies that directly or indirectly hold a stake in the share capital of a Russian company, especially with regard to compliance with the conditions for the automatic application of the so-called CFC rules (rules for taxation of a controlled foreign company).

In practice, this means that as of 2023, when the Russian Federation was added to the list, the related income at the level of the Czech controlling company is subject to corporate income tax and this fact should be taken into account when preparing the tax return for the first time for 2023. The potential levy is calculated in accordance with the provisions of the Czech Income Tax Act, through which the activities of the Russian company are viewed, i.e. they are taxed as if they were carried out by the Czech controlling (parent) company itself. In practice, this can result in many uncertainties and complications. It is possible that after the whole administrative “exercise”, no additional tax will be paid in the Czech Republic because the income tax paid in Russia will either equal or exceed the tax calculated by fiction.

Information on the impact of Russia’s inclusion on the list of non-cooperative jurisdictions can also be found in our previous article Russia on the EU blacklist. How does it impact Czech taxpayers?.

If, based on the information above, you have assessed that the above obligations apply to you, or if you are unsure whether they do, please do not hesitate to contact us. We would be happy to discuss your situation with you and suggest an appropriate course of action.