Ekaterina Kopylova, tax consultant at TC, commented on the ruling of the Constitutional Court of the Russian Federation in the Success & N case in the Vedomosti newspaper.

The issue of the lawfulness of imputing to a company income from the transfer of property to a former participant and the tax consequences of the transaction, which we wrote about earlier, has been further developed.

Back in October 2024, the Constitutional Court of the Russian Federation held an oral hearing on the request of the Supreme Court of the Russian Federation to verify the constitutionality of the provisions of the Tax Code of the Russian Federation regarding the issue of income arising for a company in case of transfer of property to a former participant in payment for the actual value of the share.

At least three variants of the legal position sounded during the hearing, and 3 months later the RF Constitutional Court adopted the Resolution of 21.01.2025 No. 2-P and ordered the legislator to bring certainty to the legal regulation.

Since 1999, the provisions of subp. 5, paragraph 3 of Article 39 of the Tax Code of the Russian Federation do not recognize the transfer of property to the withdrawn participants as realization within the limits of the initial contribution. In law enforcement practice there was a position that the company had no income from such a transaction. The Constitutional Court of the Russian Federation changed this approach and recognized its taxation as legitimate.

At the same time, the Ruling of the Constitutional Court of the RF traces a certain «duality» in the understanding of the approach: on the one hand, the Court points out that the company should not necessarily have income during the period of possession of the received share, on the other hand, there are no grounds for exempting such income from taxation when the company acquires a share.

At the same time, the Constitutional Court of the Russian Federation still determined that such economic benefit is legitimate and excluded the possibility of determining the amount of income by the value of the transferred property.

In the absence of a legislative provision for full exemption from taxation of this kind of economic benefit (income) of a taxpayer, the Court held that its amount requires assessment for the purposes of tax calculation and payment and may be determined on the basis of the market value of the former participant's share based on the results of settlements with him. Such a value of income will at least reflect the economic result achieved at the stage of economic activity.

Before the amendments were introduced, the RF Constitutional Court instructed taxpayers to be guided by the following: taxation may arise on the basis of the actual value of the share transferred to the company based on the results of the assessment of the economic benefit received when the participant withdraws from the company.

Despite the fact that the RF Constitutional Court considered the issue at the request of the Supreme Court of the Russian Federation in the case of «Success and N» - a company on the simplified taxation system («income»), the position of the RF Constitutional Court may be fully applicable to organizations on the simplified taxation system, since the Court based its approaches on the provisions of the Tax Code of the Russian Federation on corporate income tax.

Taking into account the position of the RF Constitutional Court, it is currently recommended that all taxpayers assess not only their transactions on the withdrawal of participants from the company, but also other economically similar corporate situations both for the imputation of income to the company and for the determination of its amount, taking into account the possible approaches presented by the Court.

It is reasonable for the legislator to consider the possibility of correlating the procedure for determining the actual (market) value of a share in the authorized capital of a company, taking into account both corporate legislation and legislation on appraisal activities.

[1] For example, Letters of the Ministry of Finance of Russia from 25.03.2021 № 03-11-06/2/2/21517, from 05.11.2019 № 03-03-06/1/84931, Resolution of FAS Volga District from 16.02.2009 in case № A65-11409/2006.

[2] When calculating the simplified taxation system is guided, among other things, by the norms on profit tax of organizations.