Tax law and tax disputes

The Russian Supreme Court on withholding tax at source when services of a foreign company are paid for According to the Russian Supreme Court payments under cross-border agreements for services (work) are treated as passive income if no operations have actually been performed.  

The status of an international company has been enshrined in Russian law

Pepeliaev Group advises that Federal Law “On international companies” (the “Law”) came into full force on 3 August 2018. The Law establishes a regime for foreign companies allowing them to change their personal law and obtain the status of international companies.

Decision of the European Court of justice on the prevention of abuse of international tax treaties

Pepeliaev Group advises that a decision in favour of a taxpayer was handed down by the European Court of Justice. This may be of significance for the development in Russia of the concept of a beneficial owner.

Tax authorities are imposing stricter controls over the justifiability of expenses on intragroup services Pepeliaev Group advises that a risk exists that the Federal Tax Service's Inter-regional Inspectorate No. 1 for major taxpayers may file claims with respect to expenses on intragroup services incurred by an entity.

Explanations of the Russian Federal Tax Service regarding the application of the concept of a beneficial owner of income Pepeliaev Group advises that the Russian Federal Tax Service (the ‘Federal Tax Service’) has disseminated among tax authorities written explanations regarding the issues of using the concept of ‘a person that enjoys the beneficial ownership of income’ (a beneficial owner of income) when international double taxation treaties are applied.

Anticipated changes to the OECD Transfer Pricing Guidelines regarding intra-group services

Law firm Pepeliaev Group advises that the OECD is carrying out a public consultation on the scope of the future revision of Chapter VII (Intra-Group Services) of the Transfer Pricing Guidelines. The issues proposed for consideration attest to the changes in the approaches OECD countries are taking to substantiating expenses on intra-group services and to whether it is possible to bring such approaches considerably closer to the practices of Russian tax authorities.

New practice of applying a beneficial rate under a DTT to intra-group loans

Pepeliaev Group advises of an improvement of the position of taxpayers in court disputes relating to the application of beneficial rates under DTTs in the context of intra-group loans. 

The first regional law providing for an investment tax deduction for profit tax

Pepeliaev Group advises that, on 22 March 2018, the Legislative Assembly of the Republic of Karelia adopted a law introducing an investment deduction for profit tax.

If a company is entered into a sanctions list, it is no longer obliged to disclose information Pepeliaev Group advises of the exceptions that the Russian Government has introduced with respect to the rules governing companies disclosing information regarding their business activity.

The supreme court has clarified the application of a reduced tax rate under a double taxation treaty to dividends in conditions of thin capitalisation On 6 March 2018 the Judicial Board for Economic Disputes of the Russian Supreme Court issued its Ruling in the case of SUEK-Kuzbass JSC. In this Ruling the Judicial Board has clarified the rules for applying a reduced tax rate under the Double Taxation Treaty with Cyprus to interest under controlled debt which was reclassified as dividends when the lender is not a shareholder of the borrower.

The new rules for notarial procedures Pepeliaev Group advises that new rules for notaries’ practice have been adopted and should now be taken into consideration when turning to notaries for notarial procedures.

Draft laws on the extension of the offshore amnesty have been submitted to the state duma and are to be adopted soon Pepeliaev Group advises that the draft laws have been published which, in line with the Russian President’s position, extend the ‘offshore amnesty’ as well as the tax-free liquidation of foreign entities and unincorporated structures.