26.08.2016 — New Electronic Service: FTS Expands Opportunities for Checking Foreign Contractors
The electronic register of the accredited branches and representative offices of foreign legal entities (RAFP) that was made available on the FTS website provides free of charge access to the public data on accredited branches and representative offices of foreign companies. Thus, businesses can eliminate certain risks during the preliminary check of foreign contractors (basic access includes 18 characteristics, including the CEO name the number of employees) and reduce the risks of transacting with unregistered companies.
The basic access displays information on the full name of the branch or representative office, its address, accreditation date, nature of business, as well as information about its foreign founder. Branches and representative offices can be found in the public database by using one of the following characteristics: accreditation number; Taxpayer Identification Number (INN) / Tax registration reason code (KPP); name of the branch or representative office. Besides, the service offers the option of downloading an electronic extract from the register with all the necessary data.
Be reminded that FTS has similar electronic service for checking the Russian contractors.
25.08.2016 — Infrastructure of Resort Areas to Be Developed at Tourists’ Expense
In order to enhance tourism infrastructure in Russia, the Ministry of Finance of the Russian Federation has suggested imposing resort fees for vacationers in the Russian resorts. The raised money will be accumulated in a special-purpose fund that will distribute its monetary assets based on an exhaustive list of possible infrastructure objects. The first bills that will introduce resort fees are to be submitted to the State Duma this fall.
In the perception of the Ministry of Finance, the resort fee will amount from 50 to 150 rubles per day per visitor of a resort area. It is also planned to introduce privileges for some categories of people, who will be released from this fee. The fee will be paid in places of stay, such as hotels, holiday centers, health resorts.
Vladimir Putin highlighted that resort fee is not a way to shift the stаte duty to finance infrastructure development to vacationers. Therefore, resort fee should not affect the amount of financial support to regions allocated by the Ministry of Finance.
Pilot projects to implement the resort fee will start in four regions – Altai Krai, Krasnodar Krai, the Crimea and Caucasus Mineralnye Vody (Stavropol region).
24.08.2016 — Lessees’ Dream Buried: Negative Court Practice Regarding Currency Lease Will Likely Persist
The landmark currency lease case between PAO “Vympelkom” (lessee) and PAO “Tizpribor” (lessor) has been settled amicably in favor of the lessee. Nevertheless, the general negative trend in court practice as for currency lease cases will likely persist, as the parties concluded an amicable settlement agreement, and therefore this dispute, which is influential for many lessees experiencing analogous problems due to depreciation of the ruble, will not be considered by the cassation court on the merits.
Be reminded that PAO “Vympelkom” filed a lawsuit against PAO “Tizpribor” demanding a change in the lease conditions by way of establishing a currency corridor. In spite of the widespread negative court practice on similar cases, the first-instance court satisfied this claim. The appellate court, however, reversed the decision, reasserting that even a significant change in currency rates may not be viewed as a basis for judicial review of the lease agreement.
During cassation hearings the parties presented an amicable settlement agreement for the court’s approval, and the proceedings were terminated. The lessee obtained a compensation from the lessor in the amount of 500 000 rubles. As a result of this amicable settlement agreement’s approval, this dispute will not be considered on its merits. In other words, despite the positive outcome for the parties to the dispute, a revolutionary precedent that could overturn the negative court practice did not take place and the courts will likely continue rejecting the lessee’s claims related to currency-based rental payments.
23.08.2016 — FTS Will Refuse Tax Benefits to Foreign Companies if Real Beneficiary Cannot Be Established
In order to identify abuses of the Double Taxation Treaties (DTT), the Federal Tax Service (FTS) instructed its territorial bodies to actively monitor transactions involving foreign companies that apply reduced tax rates under DTTs. Thus, companies making transit payments through offshore countries risk losing their future tax benefits or having their existing tax benefits challenged in court.
Court practice on such disputes has already been settled. Courts generally support the FTS: if the final beneficiary is a technical company, which merely redirects money to other jurisdictions, then DTT privileges do not apply to such transactions and the profit tax rate for foreign companies can make up to 20%.
In 2018, information exchange between tax authorities of various jurisdictions will occur automatically once a year, and as a result it will become easier to establish companies’ real beneficiaries. For this reason, many companies have already abandoned such transit transactions schemes, instead preferring to adapt new refinancing structures or to reinvest profit in other assets before transferring it to ultimate beneficiaries.
22.08.2016 — Directors and Controlling Persons to Be Held Liable for Debts of Bankrupt Companies, FTS Insists
Since the beginning of 2016, each territorial body of the Federal Tax Service (FTS) has a special bankruptcy department, which is designed to reveal signs of a company’s bankruptcy and suspicious activity of its management at the time of tax audits. Moreover, in September, 2016, amendments to the Bankruptcy Law will come into force, expanding the opportunities for holding owners and directors of companies liable for the company’s debts.
If the company is charged with a substantial amount of additional taxes (exceeding tens of millions of rubles) or if there is a risk of asset stripping, in particular if the company’s assets have been sharply reduced over the last three years, FTS can send its own bankruptcy specialists to the company for inspection. If assessment of these risks elicits signs of bad faith management activities, FTS can initiate bankruptcy proceedings and demand that the controlling persons and the director of the company are held liable for the company’s debts. In the first half of 2016, FTS has already collected over 31 billion rubles of tax debts from bankrupt companies, which exceeds the total figures for 2015 (28 billion rubles).
In September, 2016, the risks for directors and controlling entities to be held liable will increase even further. All persons that had controlled the company’s activity over the last 3 years before going bankrupt will be at risk (currently the term is only 2 years). Besides, the companies’ officials should be aware that liability for the company’s debts is not the only risk. In the event that their company goes bankrupt the officials can also be disqualified for late submission of the bankruptcy petition or for failure to comply with court decisions on their liability for the company’s debts.