Resolution of the Plenum of the Supreme Commercial Court of the Russian Federation “On Certain Aspects of Application of Part I of the Russian Tax Code” has been published


Legal Update No. 437, 10 September 2013

Goltsblat BLP advises that, on 27 August, Resolution No. 57 of the Plenum of the Supreme Commercial Court of the Russian Federation (the “SCC”) dated 30 July 2013 “On Certain Aspects of Application of Part I of the Russian Tax Code” was published. Its introduction and wording had been widely discussed for several years and were the subject of long-running debate and controversy within the professional community, even before the final version was passed.

Below is an overview of the Plenum Resolution provisions we believe to be most important.

  • Taxes may be recovered from the tax agent

The Resolution envisages the possibility of recovering taxes from the tax agent in full, if the tax agent fails to transfer them to the budget when it makes payments to a foreign entity not registered with the Russian tax authorities. For years, court practice has adhered to the diametrically opposite position on the matter.

Given that taxes, fines and penalties may be recovered from the tax agent, this provision may lead to a substantial increase in risks associated with making payments to foreign entities and make the tax authorities focus more closely on this kind of transaction.

We believe that these amendments should be taken into due consideration in structuring international transactions and concluding contracts with foreign contracting parties, in which, in most cases, it is reasonable to agree expressly the liability of such parties to reimburse these sums.

  • Pre-trial procedure for settling disputes with the tax authorities becomes more important

The general rule is that the taxpayer provides objections to tax authority conclusions and relevant evidence at all stages of tax control until a superior tax authority adopts a decision on a complaint.

The taxpayer is also entitled to furnish additional arguments and evidence directly to the court, though, in this case, the legal expenses may not be recovered even if the case is won.

It should be noted that, pursuant to the amendments to the Russian Tax Code that recently came into effect, additional documents submitted to a superior tax authority are considered thereby only if it was impossible to submit these documents to the tax authority whose decision is challenged.

In this context, the procedure for pre-trial appeals against post tax audit decisions becomes significantly more important, as it is now vital to develop as full as possible a legal position when objections are prepared.

  • No liability is imposed for late presentation of tax reporting for reporting periods

The SCC emphasises that no liability is imposed by virtue of article 119 of the Russian Tax Code for late presentation of tax reporting for reporting periods, no matter what these documents are called in any given chapter of the Russian Tax Code.

This provision is mostly important from the practical point of view with respect to missing deadlines for submitting quarterly profit tax returns.

  • Application of the tax computation method with respect to challenged operations with bad faith contracting parties

The Resolution requires the tax authorities to use the computation method when either companies lack relevant documents or their documents are considered inadequate. If documents are lacking or considered inadequate with respect to certain operations, the tax authorities should calculate the income and expenses associated with these operations on the basis of the taxpayer’s data about similar operations.

The burden of proof as to whether income and (or) expenses determined by the tax authorities is (are) in line with the actual conditions of conducting business will be borne by the taxpayer.

It should be noted that the tax computation method will not be applied with respect to VAT deductions.

The Plenum Resolution lays down many provisions that change current law enforcement practice, so we recommend reading the full version.

It should also be noted that conclusions referred to in the Plenum Resolution may be used in considering cases related to previous tax periods.

For additional information, please contact:

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

Sergey Likhachev,
Associate Director, Tax Practice,
Goltsblat BLP
T: +7 (495) 287 44 44,

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