Industries

• Employees involved

  Mikhail Begunov, Nikita Zharov

• Process description

  A client provides IT services for a parent company. The company believed that the IT services provided to the parent organisation may not comply with the provisions of the Russian Tax Code for the application of tax exemptions. The company contacted Tax Compliance in order to assess the possibility to apply tax exemptions.

• Result

  The Tax Compliance team as a result of the project: (1) analysed the client's intercompany agreements to determine the validity of tax exemptions for IT companies; (2) developed proposals to adjust agreements and primary documentation to ensure their compliance with tax legislation.

Advising a client on obtaining the status of an accredited IT company

• Employees involved

  Mikhail Begunov, Nikita Zharov

• Process description

  The Tax Compliance team was faced with the task of assessing the prospects for the client to obtain the status of an accredited IT company.

• Result

  Based on the results of the analysis, the Tax Compliance team came to the conclusion that in the current period the client does not meet the conditions established by Decree of the Government of the Russian Federation of September 30, 2022 N 1729. In addition, the Tax Compliance team developed a road map in which it outlined a possible algorithm of actions that will allow the client to apply for the status of an accredited IT company in the next period. The client's management approved the roadmap and decided to implement the Tax Compliance proposals in order to ensure the possibility to apply for the status of an accredited IT company in the next period

Client support within the framework of obtaining the status of an accredited IT company

• Employees involved

  Mikhail Begunov, Nikita Zharov

• Process description

  The Tax Compliance team had the following tasks: (1) to analyze the possibility of obtaining the status of an accredited IT company by the organization; (2) accompany the client in obtaining the status of an accredited IT company.

• Result

  Based on the results of the analysis, the Tax Compliance team suggested that the client finalize the organization’s website in order to ensure its compliance with the requirements established by Decree of the Government of the Russian Federation of September 30, 2022 N 1729. After making adjustments, the Tax Compliance team: (1) helped the client collect a package of documents required to apply for obtaining the status of an accredited IT company; (2) assisted the client in drafting a statement confirming the share of the company's income from IT activities. Based on the results of consideration of the client's application, it was decided to include it in the list of organizations accredited in the field of IT.

Recommendations on accounting of transactions for issuing electronic gift cards to customers for tax purposes were prepared

• Purpose

  Analysis of tax risks associated with the transfer of gift cards to customers

• Employee involved

  Nikita Zharov

• Process description

  The team was tasked with analyzing the income tax and personal income tax risks that may arise from the transfer of electronic gift cards to customers.

• Result

  As a result of the analysis, proposals were developed aimed at managing tax risks in the transfer of gift cards to customers

Client was involved in a case for subsidiary liability for the obligations of a debtor in liquidation as a defendant

• Purpose

  Representing a former manager of a company in arbitration court in a case for bringing him to subsidiary liability

• Employee involved

  Andrey Solomyany

• Process description

  Bankruptcy trustee claimed vicarious liability of the former CEO and participant of the company in liquidation on the grounds that the transactions had caused substantial harm to the property rights of the creditor and failure to fulfill the obligation to apply to the court for bankruptcy of the company headed. Tax Compliance experts developed a defense stance substantiating the absence of grounds for bringing the Client to subsidiary liability and refuting the applicant's arguments

• Result

  The court refused to bring the company's general director to subsidiary liability because of an absence of evidence of the corpus delicti in the actions of the debtor's former general director

This is the first example of a tax dispute in favor of the taxpayer to confirm the reality of transactions with counterparties in the framework of traffic services.

• Process description

  The client appealed to the arbitration court with a claim to the tax authority to invalidate the decision made on the basis of the field tax audit. The basis for the accrual of additional taxes, penalties and fines served as the basis for the conclusions of the tax authority that the Client received an unjustified tax benefit in the relationship with several counterparties, which, as telecommunications operators, could not provide services for traffic transit in connection with the fact that they had signs of organizations that do not perform real financial and economic activities. The main difficulty in proving the case is that the "traffic service" has no clear material expression and is not subject to visualization, therefore it was very difficult to collect the evidence base confirming the reality of transmitting traffic. During the court hearing Tax Compliance lawyers managed to have technical expertise assigned to the case and attach the expert's conclusion to it. As the result of legal efforts and well-designed defense strategy the court of the first instance partially ruled in favor of the Client. In this case the court saw an opportunity to interpret the concept of "due diligence" in favor of telecom companies. It pointed out that, given the specifics of the traffic services provided, as well as the peculiarities of the communications equipment through which the services are provided, the process of checking the availability of the counterparties' communications equipment, as well as the setting up of the connection was carried out remotely. This approach (if supported by higher courts) may be used by other recipients of similar services (in particular, telecommunications companies), both at the stage of selecting counterparties and when defending against claims of tax authorities.

• Result

  Tax Compliance team managed to defend about 50% of the additional tax charge (in the part of corporate income tax the Client's claims were recognized as legitimate). This dispute is unique and forms positive arbitration practice for the entire telecommunications industry.

Analysis of the client's business structure for the possibility of applying the tax benefits provided for in the IT maneuver

• Purpose

  The Tax Compliance team had the task of analyzing certain types of business transactions for the possibility of applying VAT and income tax benefits.

• Employees involved

  Mikhail Begunov, Nikita Zharov

• Process description

  Analysis of individual business transactions for their compliance with the conditions for the application of VAT exemption and accounting for the purpose of 90% threshold of income from IT-activities was carried out.

• Result

  Based on the results of the analysis, Tax Compliance team has come to the conclusion that the business operations of the client comply with the conditions stipulated by Articles 149 and 284 of the Tax Code of the Russian Federation; recommendations on the improvement of the internal document flow in the company have been prepared as well. As a result, the client decided to start applying the tax benefits provided for by the IT maneuver.

Recommendations were prepared for the client regarding the procedure for separating the IT-function within the Group, and the tax risks associated with such a reorganization were analyzed.

• Purpose

  The client decided to separate the IT function within the Group into a separate organizational structure. Our team was tasked with determining the tax treatment to be applied by the new IT company, as well as preparing recommendations to mitigate tax risks that could arise in connection with the reorganization.

• Employee involved

  Nikita Zharov

• Process description

  As a result of the analysis, the team prepared recommendations for the client on the most appropriate tax regime for the new structure, as well as developed proposals aimed at managing the tax risks associated with the reorganization.

• Result

  As a result of the analysis, the team prepared recommendations for the client on the most appropriate tax regime for the new structure, as well as developed proposals aimed at managing the tax risks associated with the reorganization.

Settled a dispute with the tax authority regarding the economic feasibility of expenses in the form of agency fees

• Employee involved

  Nikita Zharov

• Process description

  The Company purchased agency services aimed at attracting new clients. The tax authority concluded in its pre-inspection analysis that the Company's expenses for the acquisition of the above services were economically unjustified and should not be taken into account for profit taxation purposes.

• Result

  The team prepared a legal position substantiating the economic necessity of engaging agents and represented the client in meetings with the tax authority. As a result of the pre-inspection analysis, the tax authority accepted a significant part of the Company's arguments.

The field tax audit period was disputed.

• Duration

  June 2019 - December 2019

• Employee involved

  Mikhail Begunov

• Process description

  The tax authority appointed a field audit after the company's reorganization started, although the field audit partially covers the periods of previous audits. An appeal was lodged to a higher tax authority. The field tax audit was reversed.

• Result

  We cancelled the results of the field tax audit for the previously inspected period. There is a positive practice of pre-trial appeal against the decision of tax authorities to appoint an on-site tax audit for the same tax period in case of its appointment in connection with the reorganization or liquidation of the company under Article 89 of the Tax Code.