“Tax Tourism” in 2026: Legal Risks and Judicial Practice

Since early 2025, a consistent body of case law has emerged regarding cases involving so-called ‘tax tourism’—the migration of businesses to regions offering preferential tax rates (1% under the Simplified Taxation System) while conducting actual operations in a different region of the Russian Federation. Current trends confirm that tax authorities are successfully proving the fictitious nature of such relocations, which results in significant financial losses for businesses.

The typical scenario for a court dispute unfolds as follows: a taxpayer registers an Individual Entrepreneur (IE) or a legal entity in a region with a preferential tax rate, while continuing to conduct economic activities from their previous place of residence or business. Following audits, tax authorities recalculate the tax at the standard rate (6% for the ‘income’ tax base), accrue penalties, and impose fines for underpayment of tax. Entrepreneurs attempting to appeal these decisions in arbitration courts consistently receive rejections.

Court rulings in such cases are based on a comprehensive analysis of evidence confirming the taxpayer’s lack of actual presence in the ‘preferential’ region:

1. Formal registration. Tax authorities successfully demonstrate that the change of residence was strictly pro-forma and aimed solely at obtaining tax benefits.
2. Lack of actual operations. If all business processes (contract execution, logistics, personnel management, office leasing) remain concentrated in the ‘pre-migration’ region, while no activity is conducted in the new jurisdiction, the preferential tax rate is deemed unjustifiably applied.
3. Sham residential registration via fractional ownership. The purchase of fractional shares in residential properties where dozens of other entrepreneurs are registered constitutes a critical risk factor. Tax authorities classify such locations as ‘fictitious addresses.’ Testimonies from neighbors, police reports, and utility consumption records serve as compelling evidence in court.
4. Facts over intentions. Only documented, substantiated facts hold legal weight in court. Plans to open a branch, medical center, or other infrastructure in the preferential region—if not supported by tangible actions, investments, and payroll records—are dismissed as meritless.

It is important to note that actions involving the simulation of residency in a preferential region may be classified not merely as erroneous tax optimization, but as the intentional misrepresentation of data. In certain instances, once evidence of willful tax evasion on a particularly large scale is established, such actions create the basis for criminal prosecution.

Current judicial practice is not favorable to businesses. The primary mistake made by entrepreneurs lies in attempting to use ‘tax schemes’ instead of genuine business relocation.

To utilize preferential tax rates legally, it is necessary to:

1. Ensure actual, rather than nominal, presence in the region.
2. Prepare documentation confirming the economic rationale for the relocation.
3. Avoid the use of mass registration addresses (‘fractional ownership’).
4. Conduct genuine economic activities at the place of tax registration.

Compliance with the law, alongside professional Tax litigation services—including the development of a defense strategy prior to the start of a tax audit—are the only tools for risk mitigation in the current economic environment.