Tax Authorities Increase Oversight of Business Relocation to Low-Tax Regions
Tax authorities have strengthened monitoring of businesses moving to regions with preferential tax rates, particularly targeting cases of artificial relocation for tax benefits. New legislative measures aim to prevent misuse of regional tax incentives.
Key Developments
- Increased scrutiny applies to businesses registering in regions offering reduced tax rates under simplified taxation systems. Rates can be as low as 1% on income (compared to standard 6%) or 5% on profit (versus 15%).
- Authorities are focusing on several indicators when examining relocated businesses:
- Registration at residential addresses used by multiple entrepreneurs from different regions
- Absence of local staff or operational expenses in the new location
- Personal transactions conducted through business accounts outside the registration region
- Information obtained from third parties, including local inquiries
- One region reported over 8,000 entrepreneurs and 200 companies registering in 2024 specifically to benefit from tax advantages, prompting verification measures.
Regulatory Changes
Since 2025, businesses moving to regions with lower tax rates must continue paying taxes at their previous higher rate for three years if the new rate provides a reduction. This targets cases where businesses register in low-tax regions without establishing genuine operations.
Implementation
Several regions have already begun implementing measures against artificial relocation schemes. The approach focuses particularly on individual entrepreneurs, whose business registration is linked to their personal residency under existing regulations.
Objectives
The enhanced oversight seeks to:
- Prevent tax avoidance while maintaining legitimate regional incentives
- Ensure fair competition for businesses across different regions
- Improve transparency in business registration practices
Companies considering relocation must now demonstrate actual economic activity in their new locations to comply with updated requirements.
The measures reflect ongoing efforts to balance regional development incentives with responsible fiscal policy. Businesses should carefully assess compliance requirements when evaluating relocation options.
