Auchan et al vs. the Russian Ministry of Finance: Supreme Commercial Court (SCC) decision resolves the problem of retail losses
Legal Update No. 443, 24 December 2013
Goltsblat BLP advises that the
full text has been published of an SCC decision invalidating part of Letter of
the Ministry of Finance No. 03-03-6/1/630 dated 06 December 2012. The part in
question prescribes that self-service retail organisations
include in their costs goods shortages for which no guilty party is established
only if an Internal Affairs investigator resolves to suspend or terminate a
criminal case on this basis.
The question repeatedly raised,
including in the Constitutional Court, concerning the documentary evidence of
goods shortages required for deducting the taxpayer’s losses from its profit tax
base may now be deemed resolved.
When the Ministry of Finance
letter determined the tax accounting procedure for thefts from self service
organisations, it referred to subclause 5, clause 2, article 265 of the RF Tax
Code as the basis for its statement that such losses may be deducted
only if a relevant criminal case is suspended by the preliminary
investigation or is terminated because no guilty party has been
The court analysed expert
opinions and copies of resolutions not to initiate criminal cases submitted for
the case files and came to the conclusion that, since it is impossible
to identify who is responsible for shortages revealed during
stock-taking at self-service organisations, there is no need to initiate a
The SCC Decision goes on to say
that clause 2, article 265 of the Tax Code does not provide an
exhaustive list of losses and, since there is no special regulation in the Tax
Code relating to tax accounting of goods shortages resulting from
unidentified thefts by consumers in self-service stores at an unknown time,
tax accounting of such losses should be based on clause 2, article 265
of the Tax Code in compliance with clause 1, article 252 thereof.
We believe the court’s
conclusion concerning absence of any special regulation was based on subclause
5, clause 2, article 265 of the Tax Code distinguishing between expenditures
relating to goods shortages in retail organisations and losses from theft. The
first type of costs is recognised in the absence of guilty
parties and the second if such parties exist but are not
identified. What happens in self-service stores is specifically theft,
so it is losses from theft rather than costs of shortages that are to be
deducted, whereas confirmation of the absence of guilty parties is required only
for shortage costs.
The SCC statements prompt the
conclusion that goods shortage losses in self-service stores may be deducted on
the basis of the general clause 2, article 265 of the Tax Code as another type
of loss not expressly named therein, so no Internal Affairs documents are
required at all.
Even so, a more conservative
reading of this given Decision is possible: to deduct such costs, a refusal to
initiate a criminal case is required. Yet, in any case, the preliminary
investigation resolution to suspend a criminal case or a resolution terminating
it, which the tax authorities previously demanded, is no longer needed.
Our information is that the
work on bill No. 254686-6 setting the maximum shortage deduction at 0.75%
revenues was suspended in the summer. Its revival may, however, be expected as
it is now the state that needs it.
For all issues related to publications, news and press releases, please contact:
If you would like to receive our legal alerts and updates highlighting current legal issues relevant to your areas of interest and providing expert commentary by our lawyers, please click on "Sign Up" and fill out the form.