Successfully defended the interests of a telecom company in a precedent-setting tax dispute which reached the Russian Constitutional Court

The team of the practice represented a large telecom company in courts of all levels where the commercial case was conducted, including during an appeal in Supreme and Constitutional Courts. The court action was triggered by a field tax audit for 2017-2019 which was scheduled by the Russian Federal Tax Service to check compliance with transfer pricing (TP) rules. The tax authority was particularly interested in the client’s agreement with a foreign related party for telecom maintenance services. The pricing in this sphere is notable for its complexity owing to the specific nature of the services and the integrated nature of the agreement.

The company believed that the decision to conduct an audit was adopted late and, hence, no audit for 2017 could have been held. Our lawyers represented the client in courts of all instances. However, the company did not succeed in any state commercial courts of four levels, or when it attempted to challenge the order of the Federal Tax Service as a regulatory instrument in two rounds in the Supreme Court. Following that, the client, with the assistance of our team, applied to the Constitutional Court. The latter recognised the provisions of article 105.17 of the Russian Tax Code as inconsistent with the Constitution and their interpretation by the courts as incorrect. According to the Constitutional Court’s Resolution No. 41-P dated 14 July 2023, the provisions of the Russian Tax Code, if understood correctly, do not imply an extension of the deadlines for an audit to be scheduled, as was done in case of our client.

The fact that only 15 judgments of the Constitutional Court have been adopted in the form of resolutions throughout the whole history of the Court attaches particular importance to the project. Moreover, the provision of the Tax Code was recognised as unconstitutional in the case at hand. The court obliged the legislature to amend the Tax Code to that extent and the lower courts to review the client’s case.