The Government of the Russian Federation may introduce a moratorium on the initiation of bankruptcy proceedings on applications of creditors to ensure the stability of the economy in exceptional cases (state of emergency, sharp change in the ruble exchange rate, etc.). [1]

Over the past three years, the Government has already used its powers twice. Thus, they have introduced:

• "Covid" moratorium in effect from 06.04.2020 to 07.01.2021;[2][3]
• "Sanctions" moratorium in effect from 01.04.2022 to 01.10.2022. [4]

The "sanctions" moratorium applied to all participants in civil law relations, except for developers of apartment buildings and (or) other real estate objects included in the unified register of problem objects.

In addition, in April 2022 the Russian Federal Tax Service issued a letter clarifying certain nuances of the application of the "sanctions" moratorium. Thus, the moratorium does not apply to:

• Eliminated Organizations;
• Persons in respect of whom bankruptcy proceedings have been initiated as of the date of the moratorium;
• Persons who cannot be declared bankrupt in accordance with Article 65 of the Civil Code of the Russian Federation (treasury enterprises, political parties, religious organizations, etc.). [5]

Subjective composition is one of the main differences between the "sanction" moratorium and the "covid" moratorium, which extended its effect only to a limited range of subjects, namely:

• Organizations and IE, the main type of activity of which is included in the list of affected industries of the Russian economy; [6]
• Systemic and strategic organizations.

HOW TO APPLY THE "SANCTIONS" MORATORIUM?

One of the consequences of the introduction of a "sanctions" moratorium in relation to the tax sphere is the non-accrual of penalties for late payment of tax, as well as other financial sanctions during the period of its operation. [7]

The analysis of law enforcement practice also reveals the following peculiarities in its application:

• The moratorium applies only to debts incurred prior to its imposition and does not apply to current payments, i.e. debts incurred during its period of validity;
• The application of a moratorium does not require any additional conditions to be met, unlike a "covid," where one had to prove the reality of pandemic damage;
• Courts have resolved the application of the stay regardless of the assertion of such claims;
• The application of the moratorium is not made dependent on the presence of signs of insolvency and (or) insufficiency of property;
• A moratorium imposes additional restrictions (e.g., a ban on dividends).

STATISTICS

Of the 39 court cases analyzed for 2023:

• 33 cases (84%) were ruled in favor of the taxpayer, with:

32 of the cases concern the exemption of penalties;

1 case - exemptions from paying the fine;

• 7 cases (16%) were decided in favor of the tax authority.

As we can see, most of the cases are positive for taxpayers. The rejected cases are related:

• Or with a request for a moratorium on current payments;
• Or with the extraordinary position of the courts, which invoke the provisions of the "covid" moratorium and require proof of the reality of pandemic damage.

These statistics take into account only court cases where the issue of application of the "sanction" moratorium was resolved directly by the court, that is, without taking into account disputes where the tax authority recalculated penalties at the pre-trial stage.

KEY ISSUES

In law enforcement practice, two key controversial issues can be identified, which are still resolved by the courts in radically opposite ways:

1. Is the moratorium exempt from the fine?
2. How do I determine if a debt is a current payment?

We'll get to the bottom of it.

QUESTION 1. IS THE MORATORIUM EXEMPT FROM A FINE?

The divergent position of the courts on this issue is presented in Figure No. 1. [9] [10] [11]

It is worth noting that only three of the above cases in principle argue on the subject of exemption from penalty during the moratorium period. The other courts do not raise this issue at all: they exempt the taxpayer only from paying penalties and reduce the penalty on mitigating circumstances.

This allows us to speak about a certain presumption of non-applicability of the moratorium to the fine in the understanding of the majority of judges.

QUESTION 2. HOW TO DETERMINE WHETHER A DEBT IS A CURRENT PAYMENT?

To determine whether an arrearage is attributable to current payments, a more general and simple question must be answered: "At what point does an underpayment arise?"

Nevertheless, even here we see as many as three differently directed positions presented in Figure No. 2. [12] [13] [14]

Let us focus our attention on the court's position stated in the case of FCU "Penal Correctional Institution No. 2 of the Federal Penitentiary Service for the Republic of Tatarstan".

The Court stated that in applying the moratorium it did not matter whether the debt was current or not, since "everyone is entitled to assistance from the state", even those companies that should not be subject to the moratorium (the applicant was a government agency).

This position of the court appears to be very peculiar because it :

• Contradicts subpar. 2 p. 3 of Art. 9.1 and subparagraph 10 p. 1 of Art. 93 of the Bankruptcy Law, which explicitly state that the moratorium does not apply to current payments;
• Ignores the clarifications of the Federal Tax Service of Russia, which explicitly states that the moratorium does not apply to treasury institutions; [5]
• Does not comply with the explanations of the Plenum of the Supreme Court of the Russian Federation, which are of a general nature regarding the procedure for application of moratoriums introduced under Art. 9.1 of the Bankruptcy Law. [8]

In essence, the appellate court nullifies all earlier clarifications concerning the procedure for applying the moratorium and establishes the need to be guided only by those provisions contained in the document on the introduction of the moratorium into force (in this case - in Resolution No. 497 of the Government of the Russian Federation dated 28.03.2022). And since it contains only one exception - real estate developers - it means that all other entities are subject to the moratorium without restrictions.

At the same time, it should be noted that the court of first instance took a different position and referred to the position of the Supreme Court of the Russian Federation when deciding on the inapplicability of the moratorium to public institutions.

CONCLUSIONS.

Despite the fact that more than a year and a half has passed since the moratorium was enacted, law enforcement practice has not yet formed an unambiguous approach to some issues of its application.

In this regard, taxpayers should be extremely careful when forming their position in order to assert their rights. For example, in order to justify the application of a moratorium to a fine, the position should contain a serious theoretical and methodological justification of the remedial legal nature of the fine. The application of a moratorium to current payments requires no less deep understanding of the actual will of the legislator and the hierarchy of normative legal acts.

***

The Tax Compliance team has broad expertise in developing legal positions in the application of moratorium exemptions.

SOURCES.

[1] Art. 9.1 of the Federal Law "On Insolvency (Bankruptcy)"

[2] Resolution of the Government of the Russian Federation No. 428 of 03.04.2020

[3] Resolution of the Government of the Russian Federation No. 1587 of 01.10.2020

[4] Resolution of the Government of the Russian Federation No. 497 of 28.03.2022

[5] Letter of the Federal Tax Service of Russia No. KCh-4-18/4265@ dated 08.04.2022"

[6] Resolution of the Government of the Russian Federation No. 434 of 03.04.2020

[7] Subparagraphs. 2 p. 3 of Art. 9.1 and subparagraph 10 p. 1 of Art. 93 of the Bankruptcy Law

[8] Resolution of the Plenum of the Supreme Court of the Russian Federation of 24.12.2020 No. 44

[9] Decree of the 10th AAC of 23.08.2023 No. 10AP-14317/2023 in case No. A41-96819/2022

[10] Decree of the 2nd AAC of 21.08.2023 No. 02AP-3392/2023 in case No. A31-7675/2022

[11] Decree of the 8th AAC of 27.07.2023 No. 08AP-5740/2023 in case No. A70-14633/2022

[12] Ruling of the 9th AAC of 11.08.2023 No. 09AP-39486/2023 in case No. A40-22864/2023

[13] Decision of the Moscow City Court of Arbitration of 14.04.2023 on case N A40-269038/22-99-5150

[14] Ruling of the 11th AAC of 27.04.2023 in case No. A65-29232/2022