Codification of the "unjustified tax benefits" doctrine (Article 54.1 of the Tax Code)

Transcription

1 Codification of the "unjustified tax benefits" doctrine (Article 54.1 of the Tax Code) Anton Nikiforov Partner, attorney-at-law

2 Distortion of information concerning business operations Checking whether a tax benefit is justified Step 1 Article54.1(1)oftheRussianTaxCode(the Tax Code ) A taxpayer is not permitted to decrease the tax base and/or the amount of tax payable as a result of distorted information concerning business operations... 2

3 Distortion of information concerning business operations Technical - methodological or legal - errors (Article 54 of the Tax Code) The actual economic rationale of the transaction (the priority of the transaction s substance over its form) No purpose of tax evasion (Letter No. ED-4-9/22123@ of the Russian Federal Tax Service dated 31 October 'aggressive' intentional optimisation) Remodelling tax (Letter No. SA-4-7/16152@ of the Russian Federal Tax Service dated 16 August 2017) 3

4 Distortion of information concerning business operations What to do? (revised tax declaration) Previous practice (Resolution No. 57 of the Plenum of the Russian Commercial Court dated 30 July 2013; article 3(3) and article 89(4) of the Tax Code) Reasoning behind the latest updates (article 312 of the Tax Code) + Resolution No. А / of the Presidium of the Supreme State Commercial Court dated 15 July 2010 (article 31 of the Tax Code) 4

5 Primary purpose of the transaction Step 2 Article 54.1(2) of the Tax Code A taxpayer may decrease the tax base and/or the amount of tax due... provided that the following conditions are met simultaneously: 1) the primary purpose of the transaction (operation) is other than the non-payment (incomplete payment) of tax and/or the obtaining of a tax credit (tax refund) 5

6 Primary purpose of the transaction Burden of proof (Letter No. of the Russian Federal Tax Service dated 31 October 2017) Other non-business and non-tax purpose of transaction (Resolution of the Moscow Region Commercial ('Arbitration') Court (MRCC) dated 22 October 2015 in case No. А /14 on Trust Bank) Alternative mechanisms for achieving the goal (Resolution of the Commercial Court for the Urals Circuit dated 16 June 2017 in case No. А /2016; Resolution of the Supreme State Commercial Court No. 53 and article 54.1(3) of the Tax Code) Resolution of the MRCC on case No. А / concerning Continental Tires Rus dated 20 April 2017? 6

7 Execution of a transaction Step 3 Article 54.1(2) of the Tax Code 2) the obligation pertaining to the transaction (operation) has been discharged by a person/entity which is a party to the agreement entered into with the taxpayer and/or a person/entity to which the obligation to complete the transaction (operation) has passed by law or under a contract. 7

8 Execution of a transaction Checking the counterparty prior to the transaction or checking execution of the transaction (how to check)? If the person that performed an obligation under the agreement cannot be established Article 54.1(3) of the Tax Code: signature, the counterparty breaking tax law Concept and approaches used by old practice and Letter No. ЕD-4-9/22123@ of the Russian о Tax Service dated 31 October 2017@ (due circumspection - Ruling of the Russian Supreme Court dated 29 November 2016 in case No. А /2015 on Tsentrregionugol (Central Region Coal) and the Ruling of the Russian Supreme Court dated 15 June 2017 in case No. А /2015 on Sportcar Centre) 8

9 Execution of a transaction If such person has been established but no proof is available that the obligation passed under the contract (article of the Russian Civil Code, (Resolution of the Commercial Court of the North Caucasian District dated 5 June 2017 in case No. А /2016)? 9

10 Execution of a transaction If the person that performed obligations has been established and there is proof (either a counterparty or other intermediaries have not paid the taxes due)? Disputes concerning a direct purchase? 10

11 The new rules coming into force Desk and field tax audits Article 5 of the Tax Code 2. Establishing liability and the new obligation; worsening a taxpayer's position no retroactive force. 3. Eliminating liability, establishing additional guarantees of the protection of taxpayers rights has retroactive force. 4. Eliminating taxpayers' obligations, improving their position may have retroactive force if the law expressly so provides. Status of the Resolution No. 53 of the Plenum of the Russian Supreme Commercial Court 11

12 Contact details Russia Moscow, St Petersburg, Krasnoyarsk, Yuzhno-Sakhalinsk and Vladivostok China Beijing, Shanghai, Guangzhou Korea Seoul +7 (495) (495)