“Tightening control over ‘related’ financial relations — Konstantin Ziyatdinov’s comment for ‘Delovoy Peterburg’

Payments within groups of companies may be treated as withholding tax dividends. Recently, the Federal tax service of Russia tightened control over "related" financial relations and secured it in court disputes.

In addition to profit, subsidiaries often pay royalties for the use of trademarks and patents, jointly reimburse advertising, promotion and many others. Traditionally, members of the group support each other by providing loans and financial assistance.

Until August 2017, the legislation did not provide for the concept of "unjustified tax benefit" at all, although it was actively used in practice.

Adopted amendments — the introduction of the Tax code of the Russian Federation art. 54.1 — legalized the right of mytars, including their own re-evaluate the relationship of market participants. In practice introduced the responsibility of taxpayers for all of their counterparties and their counterparties, etc.

In the relationship with the parent and sister companies, they are scanned carefully.

Payments to the same Dutch, Luxembourg or other companies with preferential taxation will fall under suspicion.

Konstantin Ziyatdinov, head of the international projects department of Prime Advice Consulting Group:

The concept of the actual recipient of income has now begun to play the first violin. Now Russian companies paying passive income to their parent or sister companies located in jurisdictions with favorable double taxation agreements (including Cyprus, Switzerland, great Britain, Luxembourg, etc.) are obliged to ensure that such income will not be "transferred" further to purely offshore jurisdictions. However, it is not yet possible to formulate precisely the requirements imposed on a foreign recipient of income.

Read the article on the website of Delovoy Peterburg