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New signs of related party

Dmitri KostalginDmitri Kostalgin

The tax authorities’ attempts to make up new grounds for recognition of individuals as interdependent have been known since the times of art. 20 of the RF Tax Code, which rests in peace since the appearance of art. 105.1 of the RF Tax Code. The RF Constitutional Court very clearly put a stop to such attempts. Since history isn’t remembered very well in our country, after a new regulation comes a new renaissance. Special ‘thanks’ to the quality of norms, which allows us to come to wonderful conclusions listed by courts on one case.

So, a taxpayer has purchased industrial equipment from the owner, in the future the equipment was passed by a lease agreement to that same supplier. That was a classic leaseback deal.

Tax officers were confused by the price of equipment purchased, so an expert assessment was commissioned. The expert found that the purchase price differs upwards from the market price more than 84%, and for certain items of equipment by more than 59,671%.

According to the taxpayer, price control is carried out between the dependent persons. It is in no way connected with the supplier (the lessee) neither through participation in charter capital, nor through the government authorities or employees.
However, the Court of Appeal overturning the decision of the first instance and supporting the tax authorities, read para. 1 art.105.1 of the RF Tax Code like this:

To recognize the interdependence of persons an influence which can be made due to participation of one person in the capital of the other is taken into consideration, in accordance with the agreements signed between them or if there is another possibility for one person to determine the decisions made by the other person.

According to the court, all people are brothers due to civil relations.

And since the applicant in relation to OOO Ostrov Juice acts as a landlord, the tax authority legitimately points to the fact that the relationship between the applicant and OOO Ostrov Juice may influence the economic results of these persons activity, and therefore, in accordance with para. 1 art. 105.1 of the RF Tax Code, these persons can be recognized as interdependent… Resolution 11AAS on the case №A55-13059/2014.

Apparently, the next milestone will be detection of non-contractual influence of one party on the other. A boy has such an influence on a girl! And vice versa. Moreover, such a development is right around the corner. Even now new decisions are being made on the presence of ‘nonregulation’ influences between two homo sapiens. But more about that next time…

We will know the fate of the case considered on May 12th at the cassation hearings.

P.S. Perhaps, you don't know the story of Seeta and Geeta. But it's was very popular indian movie in Soviet Union.

Managing partner of Taxadvisor lawfirm