Tax Flash Reports

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Amendments to the Law on Trade

The Federal Law introducing amendments to the Law on Trade was published on 4 July. It sets a cap on all fees paid by food suppliers to retailers (including promotion fees) at 5% of total purchase price, and reduces the maximum allowed payment period for retailers buying food products. These amendments came into effect on 15 July 2016 and apply to all agreements starting from that day. The “old” agreements should be aligned with the new requirements by 1 January 2017.

Purchasing eurobonds from foreign entities on the secondary market: unexpected court practice developments

Please be informed about the recent negative court decision relating to Russian withholding tax payable in case of purchase of Eurobonds by Russian entities on the secondary market. The court ruled out that interest income, which is paid as a part of purchase price of eurobonds, issued by foreign companies in the interest of Russian companies, is deemed Russian source income of the relevant seller, i.e. the Russian company acquiring such eurobonds is supposed to withhold income tax at source.

Russian FTS shortens the “blacklist”

On 14 July 2016, the Russian Federal Tax Service (FTS) published a draft order introducing the new version of so-called “blacklist” of those countries or jurisdictions that do not share tax information with the Russian Federation, which was approved by FTS Order No. ММВ‑7-17/117@ of 4 March 2016.

Paying taxes for another company: overview of a court practice

This Tax Flash Report covers a number of recent court cases concerning situations where taxes underpaid by one company were collected from another related company. As we can see, transferring business operations and assets to another entity, and sometimes liquidating a controlled debtor entity, do not permit taxpayers to avoid liability. The option of collecting taxes from a debtor’s related party instead of the debtor itself is allowed under Article 45 of the Russian Tax Code. The tax authorities use this option and the courts support them if they see indications of pre-agreed actions by the parties aimed at evading taxes. We should note that the relevant court practice that we reviewed concerns cases of non-payment of Russian tax (with the transfer of the entire business, usually construction-related, to a related party). However, we cannot rule out the possibility that the tax authorities may expand the range of their claims to cover, for example, instances of an entity’s liquidation to avoid deoffshorisation rules.

Errors made upon customs clearance can be rectified without penalty

On 23 June 2016, Russian President Vladimir Putin signed several legislative acts amending the Russian Code of Administrative Offences (the Code) regarding administrative liability for customs violations. These amendments took effect on 4 July 2016. A number of the amendments are rather technical and aimed at bringing Russian customs legislation in line with definitions given in the Eurasian Economic Union (EAEU) legislation. However, some amendments are critical and, in our opinion, could have significant impact on companies involved in foreign trade activities. In particular, the most desired by the Russian business amendments relate to voluntarily disclosure of non-declared goods to the customs authorities without being held administratively liable.