Russia proposal to De-List the UAE as an “Offshore” Jurisdiction: What It Means and Why It Matters

Why Russia’s Proposal to De-List the UAE Matters

In today’s evolving global marketplace, Russia and the United Arab Emirates (UAE) have developed a steadily expanding economic relationship built on commercial priorities, investment flows, and regulatory alignment signalling a deeper phase of Russia UAE tax cooperation. Over recent years, Russian corporations and investors have increasingly utilised the UAE as a strategic business hub due to its advanced financial ecosystem, diversified economy, and connectivity to global markets.

As countries worldwide continue to update their tax, transparency, and investment frameworks, Russia and the UAE continue to align regulatory frameworks relevant to cross-border taxation and investment. This alignment is now entering a new phase shaped by regulatory and tax policy developments rather than geopolitical drivers.

In November 2025, Russia’s Ministry of Finance released a draft regulation proposing the removal of the UAE from its official “offshore jurisdiction” list. The objective behind the proposal is to enhance tax transparency, simplify cross-border tax administration, and modernise bilateral economic cooperation. If finalised, the change, Russia offshore list removal 2026 proposal will have implications for profit distributions, withholding tax exposure and repatriation models for Russian - UAE business groups.

More than a legislative update, this development reflects an evolution in international tax coordination. It is expected to influence holding structures, tax planning mechanisms, and long-term investment patterns between the two jurisdictions.

With that context in mind, let’s explore what Russia’s proposal to de-list the UAE truly means for tax planning, investment strategies and the future of this rapidly evolving economic partnership.

What Exactly Is Changing Under Russia’s New Offshore Jurisdiction Proposal?

Under Russia’s current rules (specifically the “special list of offshore zones” established by Order No. 35n of 28 March 2024), jurisdictions on the list are denied certain domestic tax benefits. Removing the UAE from this list would, from 2026 onward, allow Russian entities to access a range of tax advantages, provided they satisfy applicable conditions (e.g., ownership thresholds, substance, holding period, and asset composition).

Several key drivers behind this shift:

1.  The New Russia–UAE Double Taxation Agreement (2025)

Russia and the UAE signed a new DTA on 17 February 2025, which includes:

• A maximum 10% withholding tax on dividends, interest, and royalties
• BEPS (Base Erosion and Profit Shifting) -style anti-abuse provisions
• Robust mechanisms for tax-information exchange and dispute resolution

   These features significantly strengthen tax cooperation and transparency.

2. UAE’s Corporate Tax & Transparency Reforms

Historically viewed as low tax, the UAE has undergone a significant transformation.

• From 1 June 2023, a federal corporate income tax came into force under UAE law.
• The rate is 0% on taxable income up to AED?375,000, and 9% on income above that threshold.
• The UAE has also committed to international tax, information exchange, aligning with global standards.

3. Russia’s Domestic Tax Policy Objectives

If the UAE is removed from the offshore list, Russia’s domestic tax rules would allow UAE-based structures to become eligible for comparatively more favourable treatment under statutory conditions. This proposal reflects Russia’s broader domestic policy direction to support the repatriation of profits and ensure predictability of capital structuring in partner jurisdictions.

Practical Tax Implications for Russian–UAE Business Structures (2026 Onward)

 Assuming the UAE is removed as proposed from 1 January 2026, the following benefits may become available to Russian-resident companies transacting with UAE-resident entities where qualifying conditions are met:

•  Participation Exemption on Dividends: A Russian company that owns at least 50% of a foreign (UAE) company for 365 days or more, and whose non-Russian real estate assets are not dominant, could receive 0% tax on dividends paid by that UAE entity.

• Capital Gains Relief for Qualifying Foreign Companies: Where the Russian company sells its participation, similarly the 0 % rate may apply if the foreign company is located in a jurisdiction not on the offshore list.

• Transfer Pricing Implications Under the New Rules: After de-listing, transactions with UAE-resident entities would not automatically be characterised as controlled based solely on jurisdiction. Instead, standard related-party and volume thresholds would apply.

•   Impact on Controlled Foreign Company (CFC) Assessments: UAE companies that are demonstrably active in business operations rather than engaged primarily in passive investment income may qualify for Russia’s CFC exemption if other statutory conditions are met.

Example Scenarios Illustrating the 2026 Tax Outcomes

Scenario 1 — When Participation Exemption Applies

A Russian resident company (“RusCo”) holds 60 % of a UAE company (“UAE Corp”) for more than 365 days. UAE Corp earns active operating income (not mainly Russian real estate) and then distributes dividends to RusCo. If the UAE is not on Russia’s Offshore-list as of 1 January 2026, and all other conditions (50%+ shareholding, 365-day holding period, non-real-estate asset composition, substance, etc.) are met, RusCo may qualify for the 0 % tax rate on the dividends. If the UAE were still on the list, the participation-exemption benefit would not apply.

Scenario 2 — When CFC Exemptions May Be Denied

A Russian resident company (“RusCo”) controls a UAE holding company (“UAECorp”) which earns passive income (e.g., royalties) and is subject in the UAE to corporate tax at 9%. Because the UAE’s rate is below 15% and the income is passive, under recently discussed Russian amendments the exemption from Russian CFC taxation may not be available or may be subject to denial - even if the jurisdiction is removed from the ‘offshore’ list.

Key Limitations Businesses Must Consider Before Restructuring

It is essential to emphasise that removing the UAE from the offshore list does not automatically mean full unlimited benefits. There are important limitations:

1. Russia’s New “15% Minimum Corporate Tax Rate” Rule

Under recent amendments (Bill No. 1026190-8):

• Transactions with counterparties in jurisdictions with CIT rates ? 15% (UAE = 9%) may be treated as controlled transactions, even if parties are not related, once annual turnover exceeds RUB 120 million.
• The CFC exemption for active income may also be constrained if the foreign jurisdiction’s rate is ? 15%, thereby limiting relief even after delisting.

2. Substance & Anti-Abuse Rules

Both the new DTA and Russian domestic law contain anti-avoidance, anti-treaty-shopping, and “principal purpose test” provisions. UAE entities must demonstrate economic substance mere form will not suffice.

3. Individual Tax Obligations

For Russian-resident individuals, CFC reporting, personal income tax, and disclosure obligations remain fully applicable, independent of offshore-list status.

Strategic Importance of Russia’s UAE De-Listing Proposal

• For Russia-UAE Tax relations: The proposal indicates increasing alignment in tax-administrative processes. The proposal reflects enhanced bilateral tax coordination and reduced administrative complexity for compliant corporate structures.
• For the UAE’s tax-jurisdiction: Delisting demonstrates recognition of the UAE’s enhanced tax transparency and alignment with international standards
• For Regional Structuring: Other jurisdictions may take note and further reforms in transparency and treaty networks could help them avoid similar offshore classifications.
• A Tax-Planning Inflection Point: For Russian businesses, this is an opportune moment to revisit cross-border structures, model tax outcomes under 2026 rules, and ensure they build a sustainable and compliant presence in the UAE.

Conclusion: What This Means for 2026 Tax Planning

Russia’s proposed removal of the UAE from its “offshore zones” list represents a pivotal shift in the tax relationship between the two countries. Anchored by a modernised DTA and the UAE’s transparency-driven tax reforms, the development may unlock efficiencies for compliant Russian - UAE corporate structures from 1 January 2026.

At the same time, risks remain: Russia’s updated minimum-rate rules, substance requirements, and anti-abuse provisions mean that success will depend on carefully designed, compliant, and economically genuine structures. For businesses with cross-border exposure, now is the time to model, plan, prepare and expert advisory will be critical in unlocking optimal outcomes in this emerging landscape.

How Water & Shark Can Support Russia - UAE Cross-Border Structuring

At Water & Shark, we understand that navigating the evolving Russia–UAE tax landscape requires careful planning, deep knowledge of both jurisdictions, and a practical approach to compliance and structuring. Our experts provide tailored cross-border advisory support, helping you adapt to regulatory changes with clarity and confidence.

1. Structuring & Re-Structuring Analysis

We will review your existing Russia–UAE arrangements, run 2026 model scenarios, and recommend reorganisations (e.g., through holding companies, SPVs, or fund vehicles) to maximise participation or capital gain benefits.

2. Treaty Application & Withholding Tax Optimisation

We assist in determining eligibility for the reduced WHT under the new DTA, ensuring beneficial-ownership, substance, and treaty abuse compliance are fully met.

3. Transfer Pricing & CFC Risk Management

We evaluate whether transactions may be treated as “controlled” under Russia’s new ??15% minimum rate rule, develop benchmarking/TP documentation strategies, and guide your CFC reporting and substance planning.

4. UAE Corporate Tax & Substance Advisory

Advise on the UAE’s 9% corporate tax regime, free-zone structuring, and economic substance requirements. Our team will help ensure your UAE entities have adequate operations, governance, and documentation to support tax efficient structuring.

5. Anti-Avoidance & Compliance Risk Assessment

Identify and mitigate risks under Russian anti-treaty-shopping rules, general anti-abuse doctrines, and beneficial-ownership requirements. Ensure structures are robust under both Russian and UAE scrutiny.

6. Ongoing Monitoring & Implementation Support

As Russia finalises its de-listing regulation, we will track developments, guide your company’s transition into 2026, and optimize cash flows (dividends, financing) while ensuring full compliance with evolving rules.

With deep expertise in UAE corporate tax and cross-border structuring, Water & Shark ensures your business stays compliant, efficient, and ready to capitalise on new regulatory opportunities.

FAQ – Frequently Asked Questions

1. When will Russia’s proposed de-listing of the UAE from the offshore jurisdiction list take effect?

 

If finalised, the de-listing is expected to take effect on 1 January 2026. Until then, all existing restrictions and offshore-list consequences under Russian law remain applicable. Businesses must prepare for structural and tax model changes in advance to avoid last-minute compliance challenges.

 

2. Does the de-listing automatically eliminate all tax disadvantages for UAE entities?

 

No. Even if the UAE is removed from the offshore list, Russia’s minimum 15% tax-rate rule, anti-abuse provisions, and Controlled Foreign Company (CFC) rules still apply. UAE entities must demonstrate real economic substance, beneficial ownership, and commercial purpose to benefit from exemptions.

 

3. Will dividend payments from UAE companies to Russian parent entities become tax-exempt?

 

Yes but only if strict statutory conditions are satisfied. The participation exemption (0% rate) may apply when the Russian company holds 50%+ of the UAE entity for at least 365 days, and the UAE company does not derive most of its value from Russian real estate. Each case must be evaluated through detailed tax modelling.

 

4. How will Russia’s CFC rules apply to UAE companies after the de-listing?

UAE entities may still be treated as CFCs if they earn passive income (royalties, interest, dividends, capital gains) or if their effective tax rate in the UAE is below Russia’s 15% threshold. In many cases, the CFC exemption for active businesses may still be denied, even after de-listing. Proper structuring and substance documentation will be essential.

 

 5. What should Russian or UAE businesses do now to prepare for the 2026 changes?

Businesses should begin modelling 2026 tax outcomes, reassessing their group structures, evaluating substance requirements, and reviewing eligibility for participation exemption and double-tax treaty relief. Early restructuring before the new rules become effective can significantly improve tax efficiency and reduce compliance risks.