The EU may include Russia in a so-called grey list of tax havens, EUobserver reported, citing a draft document.

The grey list usually includes countries with "harmful" tax regimes. In the case of Russia, the EU was displeased with the special administrative areas (SAR, the so-called "Russian offshore").

Israel, Bermuda, the British Virgin Islands and others could also be added to the grey list. In total, the number of countries in the list should increase from 15 to 25. Transactions with them will be subject to special monitoring, Kommersant writes.

The EU considers that such states are not fully compliant with international tax standards, but are willing to cooperate and have made sufficient commitments on further reforms. EU ministers are due to decide on the extension of the grey list on 24 February.

The Russian government is discussing the possible consequences of this decision, anonymous sources told Vedomosti.

Vedomosti cites a source close to the government and two people familiar with the discussions in the government's financial and economic bloc. The paper writes that the European Council will include Russia in the second group of the list of "non-cooperative jurisdictions". The second group - Annex II - is the so-called grey list. The first, Annex I, would involve blacklisting. Blacklisted residents are subject to stricter tax controls. If a country meets its obligations to the EU, it is removed from the list.

The EU Council called Russian SARs (Special Administrative Regions) "harmful tax regime" in its June 2021 report. The EU believes that "Russian offshore" creates unfair tax competition. The EU has voiced two demands: to oblige companies to open offices with employees when moving to SARs, as well as to make the regime accessible to Russian holdings. Russia must amend the legislation by 31 December 2022, a Vedomosti source said.

Last year, Deputy Finance Minister Aleksei Sazanov said that it was planned to reach a compromise with the EU in the first quarter of 2022. The deputy minister said that the Finance Ministry agreed with the EU's first requirement and started negotiations on the second: the ministry is working on the possibility of admitting Russian companies to the SARs.

Initially, "Russian offshore" was created for foreign companies with Russian roots, this measure was aimed at bringing them back into the Russian jurisdiction. In July 2021, the Ministry of Economy prepared a package of draft laws to make SAR more attractive. According to the amendments, young companies registered no later than the beginning of 2020 (currently - 2018) will also be able to move to the SARs. In addition, international personal funds of foreign nationals with assets of at least RUB 5bn will also be allowed to move to these areas. Investors, however, saw risks in "relocating" Russian companies.