Tax law and tax disputes

A mutual agreement procedure in the context of double tax treaties

Pepeliaev Group advises that the Russian Ministry of Finance has published its Guidelines on a mutual agreement procedure.

May foreign holding companies that serve the interests of one group of persons not be beneficial owners of income? Law firm Pepeliaev Group advises that the court has used in practice the conclusions of Letter No. SA-4-9/8285 of the Russian Federal Tax Service dated 28 April 2018 regarding the application of international tax treaties by foreign holding companies that serve the interests of a single group of persons.

Transformation of environmental charges

Pepeliaev Group advises that a draft law has been made available for public discussion. This draft law provides for the charge for a negative environmental impact to be replaced with an environmental tax, and for environmental and recycling fees to be replaced with a recycling fee, with the new payments being introduced into the Russian Tax Code.

Сlarifying the rules for calculating taxes on income from capital and other amendments to the Tax Code to come into force from 2019 Pepeliaev Group advises that amendments have been made to the Russian Tax Code that clarify the rules for calculating taxes on income from capital, and that other tax changes have been made.

A new Circular Letter of the Central Bank of Cyprus on shell companies

Legal firm Pepeliaev Group advises that the Central Bank of Cyprus has issued an additional circular letter regarding shell companies, containing more favourable explanations as to when a company is classified as a shell company.

A tax agent may recover an amount of tax it paid from its own property on behalf of a foreign person by using the institution of unjust enrichment The Commercial Court, in the case of the Organising Committee of the 2014 Olympic and Paralympic Winter Games in Sochi, has recognised as lawful the application of the civil law mechanism for recovering from a foreign person an amount of unjust enrichment in the form of tax that a tax agent has paid on behalf of the foreign person, together with interest for using the other party’s money.

The Russian Supreme Court on a tax benefit for movable property

Despite the literal wording of article 381(25) of the Russian Tax Code, movable property that was acquired from a related party can be exempted from taxation in certain cases, according to the Russian Supreme Court.

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.