European Companies in Russia 2026: Operating

Practical guide for EU and European companies still operating in Russia. Treaty suspension, Type C accounts for dividends, the 60% exit discount…

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.

The current position: unfriendly jurisdiction status

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:

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.

Companies still operating: the compliance framework

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:

Corporate income tax

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.

VAT

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.

Transfer pricing

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.

Payroll and HR

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.

Dividend payments: the Type C account problem

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:

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.

The exit framework for EU companies

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:

Government Commission approval

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.

The 60% mandatory discount