Nicola Sharp of financial crime specialists Rahman Ravelli considers the reasons why.

The European Union (EU) has placed Russia on its list of non-cooperative jurisdictions on tax matters. The move comes as a result of Russia changing its business legislation in a way the EU considered detrimental and unfair. It also follows the breakdown of EU-Russian relations since Russia invaded Ukraine.

The EU list of non-cooperative jurisdictions on tax matters was devised to combat tax evasion, fraud and avoidance, and improve global tax governance. Updated twice a year, it is made up of countries that have failed or refused to fulfil their obligations to comply with good tax practices.

The executive vice president of the European Commission, Valdis Dombrovskis, noted that there has been no engagement from Russia. The European Commission also found that Russia failed to resolve harmful parts of its legislation relating to the income received from intellectual property and "grandfathering provisions" that enable organisations to adhere to old regulations as opposed to new regulations.

When the breakdown in communications between the EU and Russia following the invasion of Ukraine is considered, it is no surprise that these tax matters have not been resolved, leading to Russia being added to the blacklist.

As part of the EU's policies, countries are assessed on their approach to tax transparency, fair taxation and tackling base erosion and profit shifting (BEPS) by multinational companies. If countries do not meet the EU's standards, they are requested to make relevant changes to their legislation in order to comply. Failure to do so may result in them being added to the list of non-cooperative jurisdictions for tax purposes, which can lead to reputational damage.

In addition to Russia, the British Virgin Islands, Costa Rica, and the Marshall Islands have been added to the blacklist.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.