European companies now operate in a harder Russian environment — suspension, Type-C accounts, unfriendly-list rules. What your specific position costs and allows — operate, repatriate, or plan an exit, and on what numbers — is the question.
15% dividend WHT with no relief, cash trapped in Type-C accounts, and unfriendly-list rules on disposals — the environment for a European group now.
Whichever fits — stay and optimise, hold, or exit — costed on your numbers so the board decides deliberately.
European companies — German, Dutch, French, Swiss, Austrian, Swedish — face a fundamentally different operating environment in Russia compared to companies from friendly jurisdictions. The suspension of tax treaties in August 2023, the 60% mandatory discount requirement for asset sales, Government Commission approval for transactions above certain thresholds, and blocked "C" accounts for dividend payments have transformed the framework. This guide covers the current position for EU and European companies still operating in Russia, and practical options for those still present.
Russia's list of "unfriendly states" (Government Decree No. 430 of 5 March 2022, updated) includes all EU member states, UK, USA, Canada, Australia, Japan, South Korea, Switzerland, Norway and others. Being on this list has specific legal consequences for transactions involving companies from these jurisdictions:
Mandatory Government Commission approval for sale of Russian assets by unfriendly-jurisdiction shareholders
Mandatory 60% discount on asset sale price — the actual proceeds can be no more than 40% of the market valuation agreed with the Government Commission
35% exit tax (voluntary contribution) on the discounted sale proceeds
Blocked "C" accounts for dividend payments — dividends can only be paid in rubles into a special Type C account, from which they cannot be freely transferred abroad
Suspended tax treaties — no reduced WHT rates on dividends, interest or royalties
Russia suspended tax treaties with 38 countries by Presidential Decree No. 585 of 8 August 2023. For EU companies, this means: dividends 15% (was typically 5–15% under treaty), interest 20% (was 0–10%), royalties 20% (was 0–10%). There is no treaty-based reduction available. The suspension is open-ended — there is no announced reinstatement date. See our full double tax treaties guide for the current status of all treaties.
Many European companies remain in Russia — either because exit is not commercially or legally feasible, or because the business continues to generate value. For these companies, the compliance framework remains largely the same as before 2022, with key differences:
Russian LLCs owned by EU companies pay 25% CIT on Russian profits — the same rate as any other taxpayer. There is no additional rate or surcharge for unfriendly-jurisdiction ownership.
Pick your situation — we'll tell you where you stand:
Standard VAT rules apply — 22% rate from January 2026, quarterly filing, input VAT recovery. No special rules for EU-owned entities. See our VAT guide.
Intercompany transactions between the Russian LLC and its EU parent are controlled transactions subject to transfer pricing rules. The suspension of tax treaties does not affect the TP documentation requirement or the arm's-length standard. TP risk for EU-owned companies may be elevated — the FTS is aware that profit extraction through intercompany pricing is a motivation for some remaining EU companies.
EU national employees with HQS work permits continue to benefit from 13% PIT and zero social contributions. Work permits for EU nationals follow the standard HQS process — EU nationality does not affect the process.
This is the most practically significant issue for EU-owned Russian companies. Dividends paid to shareholders from unfriendly jurisdictions can only be paid in rubles into a special Type C account at a Russian bank. Type C accounts are subject to severe restrictions:
Funds in Type C accounts cannot be transferred abroad in foreign currency
Funds can be used for limited purposes within Russia — purchasing Russian securities, real estate in some cases, or held as ruble deposits
Conversion to foreign currency for repatriation requires a special permit from the Government Commission
In practice, Type C account funds are effectively trapped in Russia for the foreseeable future
As a result, most EU-owned Russian companies have suspended dividend distributions entirely. Profits accumulate on the Russian LLC's balance sheet as retained earnings — available for future distribution if and when the restrictions are lifted, but not repatriable in the interim.
Where the EU parent genuinely provides services to the Russian LLC — management, IT, finance, HR, legal — cost recharge under a properly documented service agreement provides a mechanism for some value transfer. The Russian LLC pays the fee (with 20% WHT), claims the expense as deductible (subject to TP scrutiny), and the EU parent receives income. This is not a dividend and is not subject to Type C account restrictions. The mechanics must be carefully documented and commercially justified — the FTS scrutinises management fees from EU parents specifically.
For EU companies that have decided to exit Russia, the process is governed by a specific framework. See our full guide to exiting Russia for companies from unfriendly jurisdictions for the complete analysis. The key points:
Any transaction involving the sale, transfer or restructuring of Russian assets owned by an EU company requires approval from the Government Commission on Monitoring Foreign Investment. The Commission reviews the proposed transaction, the price, the counterparty and the terms.
For a European company deciding to sell its Russian business, the single biggest number is not the market value of the asset — it is how little of that value the current rules let you keep. Since October 2024, the conditions the Government Commission imposes on exits by unfriendly-jurisdiction sellers have hardened to the point where a sale returns a fraction of the headline worth.
Two mandatory conditions drive this:
A compulsory discount of at least 60% off the market value of the assets, as determined by a Russian government-approved independent appraiser. The appraisal is done on a going-concern basis, so the parties cannot inflate the discount by arguing a fire-sale value — the discount comes off a full valuation.
A "voluntary contribution" to the Russian federal budget — in practice an exit tax — of at least 35% of the undiscounted market value. It is paid in instalments: 25% within a month of closing, then 5% within a year and 5% within two years.
On top of these, any transaction where the asset value exceeds 50 billion roubles (around 512 million US dollars) requires the personal approval of the President.
The combined effect is that once the 60% discount and the 35% contribution are applied, a departing seller typically retains only around 5% of the appraised value of the business. That is by design — the rules exist to make exit costly enough to discourage it.
For a European board, this changes the shape of the decision. The choice is not simply "stay or go" but "stay, or accept recovering roughly a twentieth of the asset's value." That may still be the right call where continuing carries its own costs — trapped profit, reputational exposure, compliance burden — but it has to be weighed against a realistic recovery figure, not the balance-sheet value of the Russian operation. Modelling the actual net proceeds of an exit is the first step before any exit decision.
15% on dividends with no treaty relief, cash potentially trapped in Type-C accounts, and compliance under the unfriendly-list rules. Laying it out as numbers — WHT, trapped cash, compliance — is what turns the picture from headlines into a basis for decisions.
It depends — dividends cost 15%, and Type-C restrictions can trap cash for unfriendly-jurisdiction owners. There are alternative routes and, sometimes, an honest 'not yet'. Mapping the realistic options for your position is the useful step.
It turns on the numbers — the cost of continuing against the cost and recovery of an exit. Costing both paths is what lets the board decide on analysis rather than inertia or headlines.
This lays out the harder environment European companies now operate in — suspension, Type-C accounts, unfriendly-list rules. Your question is what your specific position costs and allows: can you operate, repatriate, or should you plan an exit, and on what numbers?
A European board reassessing Russia? The financial picture is worth completing before the decision.
Practical support for international business in Russia.