On October 17, 2022, the Supreme Court of the Russian Federation clarified[1] the procedure for taking into account taxes that were paid by participants in a "business splitting" scheme when determining the amount of tax additional charges to the scheme organizer.

Factual circumstances

The tax authority, following a tax audit, came to the conclusion that the Uvradom group of companies had used a scheme to "split" the business in order to evade taxation. As a consequence, the tax authority: (1) assessed the organizer of the scheme[2] additional taxes under the general taxation system; (2) in determining the actual tax liabilities of the organizer of the scheme did not take into account taxes paid by the "scheme" participants in the application of special tax regimes. 

The courts of three instances supported the position of the tax authority and also pointed out that the participants in the "scheme" had the right to clarify their tax obligations by submitting revised tax returns and refunding overpaid amounts of taxes from the budget.

Position of the Supreme Court of the RF

The Supreme Court of the Russian Federation has considered the issue of the procedure for taking into account the taxes paid by the participants of the "business splitting" scheme in determining the additional tax charges to the scheme organizer.

Based on the results of consideration of the case, the Judicial Board of the Supreme Court of the RF sent the case for a new examination and drew attention to the following:

The amount of additional tax accrued to the organizer of the "split" business scheme is subject to reduction by the amount of taxes paid by the elements of such a scheme in connection with the application of special tax regimes.

Offset of taxes paid by elements of a business "split" scheme is carried out in the following order: (1) against arrears of corporate income tax; (2) against arrears of other taxes, including indirect taxes.

What does this mean for business?

The question of the need to take into account the taxes paid by the participants in the "split business" scheme in determining the amount of additional tax charges to the scheme organizer must have been clearly closed after the publication of Letter N БВ-4-7/3060@ of March 10, 2021 of the Federal Tax Service. 

However, law enforcement practice has formulated a number of positions that have significantly complicated the possibility of an offset (for example, see the case of IE Gutorova K.V. (A60-29781/2020).

Territorial tax authorities in the framework of control measures could also take a more conservative position, for example, completely denying the taxpayer the right to record the taxes paid by the participants of the "scheme", or not allowing the possibility of recording the relevant amounts against indirect tax arrears. 

Given the above, we can clearly state that the above legal position of the Supreme Court of the Russian Federation is positive for the business community. Therefore, businesses that are currently at the stage of settling disputes with the tax authority should: (1) assess the possibility of applying the above legal position of the Supreme Court of the Russian Federation in a particular case; (2) carry out a mathematical check of the calculation of tax claims, taking into account the above legal position of the Supreme Court of the Russian Federation.  

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[1] Determination of the Supreme Court of the Russian Federation № 301-ES22-11144 on October 17, 2022 in case № A43-21183/2020

[2] LLC "Home Management Company of Sormovo district "Sormovo"