What is a tax amnesty for business splitting 

Tax amnesty for business splitting is a mechanism for terminating the obligation to pay taxes incurred for tax periods 2022-2024, related penalties and fines for offenses related to the fact of business splitting. 

Who can take advantage of it

The tax amnesty is held in accordance with Article 6 of Federal Law No. 176-FZ of 12. 07. 2024 for companies and entrepreneurs who used business splitting schemes in order to optimize their tax obligations. 

Amnesty conditions

If taxpayers in 2025-2026 voluntarily refuse from business splitting, the amounts of additional taxes, penalties and fines based on the results of tax audits for 2022-2024 will be written off in accordance with the procedure specified in Article 6 of the Law 176-FZ. 

The following factors are important conditions for the application of the amnesty: 

• business split was for the period 2022-2024.;
• the person voluntarily renounced the split. 

Business split: definition of the concept

It is interesting to note that specifically for the purposes of amnesty, the Law defines “business splitting”, from which the following features can be distinguished: 

• division between a group of persons of a single entrepreneurial activity by applying special tax regimes in excess of the limits of the exercise of rights under Art. 54. 1 OF THE TAX CODE OF THE RUSSIAN FEDERATION;
• control of these activities by the same persons;
• the purpose of splitting: understatement of taxes. 

Questions on business splitting and tax amnesty

The definition of business splitting in the law often raises questions. For example, one of the frequently encountered questions is: what is a "division of a single entrepreneurial activity"? 

Examples of such a split are given in Letter No. BV-4-7/8051@ of the Federal Tax Service of Russia dated 16. 07. 2024. Here are its main features: 

• parts of a single production process are separated while aiming to achieve a common economic result;
• a family member is involved in the business formally, without real entrepreneurial functions and independence. 

Is it necessary to establish the fact of business splitting by a tax audit? 

The law does not directly regulate the need for an audit. However, the fact of business splitting can be fixed by it. And the decision on such an audit for the period 2022-2024 must be made and come into force after July 12, 2024 (the date of entry into force of the Law). 

Is amnesty possible without the auditors using the words “business split” in the act (decision) on a tax audit? 

If the auditors describe a scheme without using the words “business split”, amnesty is possible. The Federal Tax Service draws attention to this in its recommendations. 

The basis for the application of amnesty in this case will be the fact that there are essential features of the concept of business splitting, by which the scope of application of this Law is determined. 

Ways of refusing to split a business

One of the main questions is: what is a “voluntary refusal to split a business” and what is the procedure for doing so? 

According to the definition in the law, a voluntary refusal to split a business is the calculation and payment of taxes by persons who participated in the split of a business in the amount determined as a result of the consolidation of income and (or) other indicators for the entire group of persons, compliance with which is a condition for the application of special taxation regimes. 

In its recommendations, the Federal Tax Service does not limit the list of methods of such refusal in any way: 

• transition of formally independent participants of business splitting to the general taxation system. At the same time, it is necessary to send a notice of refusal to apply the simplified taxation system by January 15, 2025;
• actual transfer of activities to one of the persons of the group;
• refusal to split the business by changing the organizational structure of the business: 

             - unification of formally independent legal entities into one legal entity with possible creation of separate subdivisions of this organization at the place of their business activities;

             - complete alienation of shares (stakes) of legal entities belonging to the group of persons to other independent persons. In this case, the group of persons ceases to operate as a single business entity.

The term “consolidation” often attracts interest. The recommendations of the Federal Tax Service clarify that in relation to “voluntary refusal from splitting” consolidation means the calculation and payment of taxes when there are no signs of business splitting in the activities of a taxpayer (group of persons) in the tax periods 2025 and 2026. 

It is also worth noting that the law regulates the possibility of partial voluntary refusal to split a business: not for all participants of a group of persons, but only for some of them. 

The result of partial refusal: termination of the obligation to pay taxes, penalties and fines in the relevant part. 

Prospects of tax amnesty for business splitting 

It is expected that from 2025 the tax amnesty will be widely used by taxpayers applying business split schemes using special tax regimes. Particularly after the Federal Tax Service of the Russian Federation gives official recommendations.