New version of the draft law on a consolidated group of taxpayers.


Legal Update No. 255. 

Goltsblat BLP advises that the Ministry of Finance has posted on the official website at a revised draft law on amendments to the Russian Tax Code in connection with setting up a consolidated group of taxpayers (on tax consolidation) previously adopted by the State Duma at the first reading. The current version has been developed by the Russian Ministry of Finance on the basis of extensive public discussions with a view to being used in preparing amendments for the second reading in the State Duma.

The basic concept remains virtually unchanged, the only fundamental change being the approach to determining the common tax base of a consolidated group. According to the revised version, the tax base is to be calculated as the difference between the aggregate income and expenses of group members, whereas the previous version of the bill excluded from the tax base income and expenses pertaining to transactions between consolidated group members. Provisions on special procedures for depreciation accrual by a consolidated group have also been removed.

Other changes to the draft law include a number of technical revisions and improvements to the contents. Among other things, the updated draft law now contains an adjusted list of requirements on members of a consolidated group, a more complete and detailed description of the composition and distribution of rights and obligations among the members of the consolidated group of taxpayers, in particular, with regard to liaison with the tax authorities.

The key provisions of the new draft law may be summarised as follows:

1. A consolidated group of taxpayers is not regarded as a legal entity and must be established under a consolidation agreement concluded between the group members for a term of at least two years and subject to registration with the tax authorities. The agreement is governed by tax law and, in the unregulated part, by civil law, and may be contested by interested parties in the event of contradiction between these (for instance, none of the requisite corporate consents have been obtained).

2. A consolidated group of taxpayers may be formed by Russian entities, each meeting the following criteria:

the entity or any other member of the consolidated group holds, directly or indirectly, at least 90% of each of the other group members;

  • the entity is a taxpayer for corporate profit tax purposes and does not apply a tax exemption or the 0% profit tax rate envisaged for educational or medical organisations;
  • the entity is not a member of any other consolidated group, a resident of a special economic zone, a payer of gaming taxes or a clearing house and is not subject to any special tax treatment;
  • the entity is not in the process of reorganisation/liquidation or bankruptcy proceedings;
  • its net asset value exceeds its authorised capital;

and whose aggregated figures across all group members for the previous year comply with the following thresholds:

  • RUB 15 bln cumulative paid profit tax, VAT, excise taxes and mineral extraction tax (other than taxes paid for transfer of goods across the Russian border);
  • RUB 100 bln sales and other revenues;
  • RUB 300 bln asset value as per the statutory accounts (RUB 1 trillion in the previous version).

3. Banks, insurance companies, non-state pension funds and professional equity market players may only form a consolidated group together with other entities with the same status (a bank, insurer, etc., respectively).

4. The draft law provides for consolidation exclusively for the purposes of corporate profit tax, other taxes being payable by the members independently. The consolidation rules do not apply, either, to the procedure for calculating, paying and submitting reporting forms for profit tax using rates other than the usual 20% (for instance, on dividends) or for income tax withheld from foreign residents at source.

5. The draft law does not allow deduction of pre-consolidation losses of group members in determining the tax base, though relevant members may report these under the general Tax Code rules after withdrawing from the consolidated group.

6. The aggregate profit tax is distributed among group members on the basis of the criteria established for distribution of profit among structural subdivisions (depending on the headcount (payroll)/ residual value of depreciable property). Limitations on expense deductibility linked to taxpayer figures are calculated for each member separately (for instance, for advertising or representative costs).

7. A responsible member representing the interests of the consolidated group of taxpayers acts as an authorised representative of the consolidated group members by virtue of law and exercises the rights and obligations of the group as a taxpayer, including those pertaining to payment of tax, submission of tax reports and dealings with the tax authorities during tax audits. Members of the group also retain the right to act on their own as part of a tax audit procedure, submit documents requested by the tax authorities and contest decisions made by the authorities following an audit. A special rule provides for the responsible member to retain a number of essential powers with regard to operations of the group after expiry of the consolidation agreement.

8. Each member of a consolidated group must keep tax records in compliance with the general tax legislation and report the required data to the responsible member. Provision of unreliable data or failure to provide data, if this results in failure to pay tax, triggers liability similar to that envisaged by Article 122 of the Tax Code for failure to pay tax.

9. A special procedure is set out for collecting unpaid tax from a consolidated group, including suspension of transactions on bank accounts. If tax is not paid, the tax authorities may, in compliance with the established order of priority, levy execution on cash on accounts and property of the responsible member and, if these prove insufficient, on cash and property of any member, which, in this event, has recourse against the responsible member.

10. Certain specifics of tax control over a consolidated group are also stipulated. In particular, a field tax audit may only be performed with regard to all members of the consolidated group and an audit on a specific member may be combined with a field audit pertaining to other taxes. The maximum duration of a field tax audit for these purposes (up to 1 year) is double that envisaged for an ordinary audit and the time frames for submission of requested documents and objections to the audit report and to a resolution following audit results coming into effect, etc., have also been extended commensurably.

11. The law is expected to come into effect on 1 January 2012. 

For additional information, please contact:

Evgeny Timofeev
Partner, Head of Russian/CIS Tax Practice, Goltsblat BLP
T: +7 (495) 287 44 44,

Andrey Shpak
Partner, Tax Practice, Goltsblat BLP
T: +7 (495) 287 44 44,

Contact details


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