FTS is treating the margin earned by offshore intermediaries not as payment for goods, but as hidden dividends or gratuitous payments. This approach allows authorities to impose corporate profit tax assessments while also applying withholding tax on deemed passive income.
Who Is at Risk?
Russian companies using on low-substance intermediary firms — entities with no real operations, employees, or expenses — are most exposed. Such “technical” intermediaries often pay minimal tax in their home countries, drawing heightened attention from Russian tax inspectors.
Penalties
Potential penalties include 20–40% fines for the taxpayer and 20% fines for the withholding agent, plus interest at the Central Bank's key rate.
Why Now?
Since 2022, many Russian businesses have relied on foreign intermediaries to navigate sanctions and import restrictions. In some cases, routing goods through a specially formed subsidiary is the only viable option. However, the FTS appears largely unsympathetic to sanction-based necessity arguments — particularly amid pressure to increase budget revenues.
Tax inspectors increasingly view intermediary mark-ups as profit shifting or tax avoidance mechanisms, rather than legitimate logistics costs.
What to Watch?
Companies using offshore intermediaries in supply chains should review their structures for commercial and operational substance, document legitimate business justification, and assess potential tax exposure in Russia. With enforcement pressure rising, proactive compliance reviews and careful structured contract are essential.
For tailored advice on managing tax risks in cross-border transactions, contact Solstico Legal.