Tax law and tax disputes

THE COURTS WIL APPLY A STRICTER APPROACH TO TAXPAYERS WHO TRY TO REDUCE TAXES ADDITIONALLY ASSESSED WITHIN THE SCOPE OF TAX AUDITS The law firm Pepeliaev Group advises that the Presidium of the Russian Supreme Arbitration Court has taken a stricter approach to interpreting legislation with regard to some actions of the taxpayers that they take in the course of or after tax audits to reduce additionally assessed taxes (Resolutions Nos. 23/11 and 11185/10 dated 26 April 2011).

Part of VAT lawfully claimed for reimbursement must be returned by the tax authority irrespective of the other part of claim that was disputed

Pepeliaev Group advises: the Presidium of the Supreme Arbitration Court developed a legal position whereby the part of VAT that has been lawfully claimed back by the taxpayer shall be returned upon completion of the audit irrespective of whether the auditors have any objections to the other part of VAT claimed back by such taxpayer (Resolution No. 14883/10 dated 12 April 2011).

Procedure for raising electronic VAT invoices approved

Pepeliaev Group advises that on 25 May 2011, the Russian Ministry of Justice registered the Ministry of Finance’s Order No. 50-n dated 25 April 2011. This Order approves the Procedure for raising and receiving VAT invoices electronically using telecommunications channels and applying digital electronic signatures (the “Procedure”). The Procedure came into force on 3 June 2011.

Interest on a late refund of VAT is assessed disregarding the date on which the taxpayer applied for a refund of the tax in question Pepeliaev Group advises that on 24 April 2011, the Russian Supreme Arbitration Court published on its official website Resolution No. 14233/10 of the Court’s Presidium dated 17 March 2011. The Resolution considered the issue of the payment of interest on a late refund of VAT (clause 10, article 176 of the Russian Tax Code) in cases in which a taxpayer who has submitted a tax return declaring an amount of VAT to be refunded has not applied to the tax authority for the tax in question to be refunded.

The Russian Supreme Arbitration Court will make the approach to VAT exemption with regard to airport services more uniform Pepeliaev Group advises that on 7 June 2011 the Presidium of the Russian Supreme Arbitration Court will consider the value added tax exemption with regard to aircraft servicing provided in airports and Russia’s air space (Ruling No. VAS-17072/10 dated 9 March 2011).

30 April 2011 is the deadline for individuals to file income tax returns (tax returns for paying additional tax) with regard to income received in 2010

Pepeliaev Group reminds you that tax rights and obligations depend on tax status, rather than on citizenship.

According to the Russian Ministry of Finance, foreign exchange losses fr om interest are not deductible from taxable profit wh ere such interest has been classified as dividends under thin capitalisation rules Pepeliaev Group advises that according to Russian Ministry of Finance, exchange losses on foreign currency interest are not deductible fr om taxable profit wh ere such interest has been classified as dividends under clause 4 of article 269 of the Russian Tax Code (Letter No. 03-03-06/1/91 dated 11 February 2011).

the Russian Supreme Arbitration Court has confirmed taxpayers' rights to receive annexes to an audit report Pepeliaev Group advises that the Russian Supreme Arbitration Court’s Decision No. VAS-16558/10 dated 24 January 2011 has held that clause 1.15 of the Requirements for Compiling a Tax Audit Report is invalid to the extent that it allows a tax inspectorate not to annex to the copy of a tax audit report given to the taxpayer being audited the documents which confirm breaches of tax legislation revealed during the audit.

Russian Court decision on permanent establishments On December 8, 2010, the Moscow State Commercial Court issued its decision in a case involving an analysis of whether the collection of information can constitute a permanent establishment (PE) under domestic law and the double tax treaty between Russia and USA dated June 17, 1992.

Amendments to the Russian Tax Code to support investment activity and innovation

30 December 2010 saw the publication of Federal Law No. 395-FZ dated 28 December 2010 “On amending the second part of the Tax Code of the Russian Federation and specific laws of the Russian Federation”. These amendments touch on different tax issues, among the most interesting of which are a company being able not to pay profit tax (or individual being able not to pay income tax) on transactions involving securities or participation interests the taxpayer has owned in Russian companies for a protracted time; taxpayers having wider possibilities in terms of determining the service life of non-tangible assets; and eliminating the uncertainty in converting advance payments received in foreign currency when calculating profit tax.

New ground for exemption from profits tax in an amicable increase of net assets Federal Law No. 409-FZ dated 28 December 2010 has brought in a new ground for exemption from profits tax in an amicable increase of net assets. This law mainly deals with the regulation of relations between companies and their shareholders relating to profit distributed but not claimed (i.e. unclaimed dividends). However, some of the amendments brought in by the law go beyond the scope of this issue.

Taxation of a unit investment trust’s property – the rules have changed Pepeliaev Group notes that Federal Law No. 308-FZ dated 27 November 2010 has amended the chapter of the Russian Tax Code dealing with property tax and land tax. In particular, these amendments make property tax and land tax applicable to the property and land plots of unit investment trusts. The law comes into force on 1 January 2011.