The Pravo.ru website has published an article where experts summarize the tax results of October. Sergey Ivanov, Tax Compliance tax consultant, talks about one of the key intrigues of October: Is a tax agent obliged to check the status of a taxpayer when paying income? "The outcome of case No. A40-121109/2022 may create virtually uncontrollable tax risks for tax agents" - says Sergey. The case has gone to the "second round" and will be considered on January 29, 2024 in the AC of Moscow.

Taxes at cross-border payment

What Happened: On October 6, the Supreme Court's Economic Collegium published a ruling on the case of the Ural Bank for Reconstruction and Development (No. A40-121109/2022). The dispute was about the amount of more than 400 million rubles, which was additionally charged for payments to the creditor - a company from Singapore.

The Supreme Court drew attention to the tax inspectorate's arguments that the Singapore company was not the actual recipient of income. It was the parent company registered in the offshore jurisdiction of the Cayman Islands, with which Russia has no double taxation treaty. It is known from the explanations of the Singaporean counterparty that the money for the loans was provided by the parent organization, and the interest was sent to its accounts on the day it was received from the Russian Federation. This is also confirmed by the purpose of the payments between the foreign companies, which referred to "repayment".

The Economic Collegium pointed out that when paying income, a tax agent must independently verify the existence of a TPF on the basis of documents received from a foreign company. 

The Supreme Court has added a layer of new risks to tax agents, which may "crystallize" as early as November 22, when the dispute will be reconsidered in the first instance, comments Tax Compliance tax consultant Sergey Ivanov. "These risks will be of a permanent nature, since a Russian tax agent, as a rule, does not objectively know whether its foreign counterparty will be a FIT and how it will dispose of the income in the future. This is not required by the Tax Code, indicating only the need to confirm the right to income", - continues the expert.

Thus, the position of the Supreme Court imposes on the tax agent the obligation to carefully check the evidence that the foreign counterparty will be the actual recipient of income. And this duty is not limited to formal confirmation of the foreign organization of its FPA, explains Artemenko. From the point of view of risk management, it turns out that any payment of income to a foreigner automatically qualifies as high-risk, because at any moment it may turn out that the counterparty is an intermediary and not a PFA, states Ivanov.

Continued in the source.