On 7 October 2026, the Council of the European Union adopted the 16th sanctions package against Russia (Council Regulation 2026/1892), introducing novel tax-related enforcement mechanisms. Key provisions include: (1) A mandatory automatic exchange of information (AEOI) between Member State tax administrations regarding beneficial owners of frozen Russian assets, leveraging the DAC8 framework; (2) Denial of VAT deduction and CIT expense recognition for transactions with newly listed entities (Annex VII expanded by 42 oligarchs and 18 state-owned enterprises); (3) Extension of the crude oil price cap enforcement to tax warehouse operators handling blended products; (4) A new “tax transparency” clause requiring EU subsidiaries of Russian parents to publish country-by-country reporting (CbCR) data nationally, regardless of EUR 750m threshold. The regulation applies from 9 October 2026.
Key Takeaways
- Immediate VAT/CIT Disallowance: Companies must screen all counterparties against updated Annex VII by 9 October 2026. Input VAT on invoices from listed entities becomes irrecoverable, and related payroll, royalty, or service costs are non-deductible for CIT, requiring prior-period adjustments in Q3 2026 returns.
- CbCR Publication Obligation: Slovenian subsidiaries of Russian groups (e.g., Lukoil, Gazprom, Sberbank affiliates) must file CbCR tables with AJPES by 31 December 2026, even if consolidated group revenue is below EUR 750m, creating a new standalone compliance track.
- Asset Freeze AEOI Protocol: Tax administrations will receive monthly data feeds from central banks on frozen asset yields (interest, dividends). Taxpayers holding such instruments must report deemed income annually, with 25% withholding tax applied at source under revised ZDoh-2 provisions.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement