Taxation and Administration of Cross-Border Transactions: Striking a Balance between Capital Control and Protecting Businesses from Sanctions

In response to external challenges and unprecedented sanctions pressure on the Russian economy, the government has introduced significant changes to legislation on the taxation and administration of cross-border transactions. At the same time, new rules introducing withholding tax on income earned by related foreign companies for work and services carried out in Russia, involving payment agents and other intermediaries in supply chains, and allowing different regulatory bodies such as tax and customs authorities to classify the same cross-border transactions differently, have raised a number of questions. These issues require thorough discussion with the participation of the judiciary, academic experts, the Russian Federal Tax Service, and the business community. How should the new rules on the taxation of income earned by a foreign entity from work or services performed in Russia for a related party be applied? How can mistakes be avoided when selecting taxation rules for cross-border transactions involving intermediaries? When do the risks of cross-border transactions being reclassified arise? On what grounds can tax and customs authorities classify the same transaction differently, for example by including dividends in the customs value of goods? What mechanisms can help minimize disputes in the tax administration of cross-border transactions?