RECENT COURT PRACTICE: A REVIEW

OF CIVIL AND TAX DISPUTES

23.11.2016

Pavel Antonov

Head of Legal

Accountor Russia & Ukraine

- TaXmas 2016

REVIEW OF TAX DISPUTES

Disputes related to receipt by taxpayers of unjustified tax benefits from cooperation with shell companies not paying taxes taxes to the budget

Both direct counterparties and suppliers of 2nd and further levels can be involved

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REVIEW OF TAX DISPUTES

Court practice on tax disputes has changed dramatically recently –not in favor of for taxpayers nowExample - Case No.А40-201390/2015

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Before referring to a real deal and the inability to control 3rd

parties’ actions were sufficient

Taxpayers are brought to liability for absence of due care and failure to establish formal document flow reflecting real commercial relations

(i) Performing due diligence before entering into significant contracts

(ii) Checking counterparties and their partners using updated databases

(iii) Not hesitating to call in lawyers to carry out necessary verifications

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WE RECOMMEND

EXAMPLES OF IMPORTANT TAX CASES IN 2016

Supreme Court Ruling No. 305-КГ16-4920 dd July 22, 2016

Case No. А40-63374/2015

Undervaluation of selling price in a real estate deal when there were no

no grounds for price control

Supreme Court Ruling No. 305-КГ15-14263 dd March 18, 2016

Case No. А40-87775/14

Tax authorities qualified loan interest as dividends

Ural District State Commercial Court Decision No. Ф09-2729/16 dd April

19, 2016 Case No. А50-15782/2015

Use of agency scheme where not required

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Moscow State Commercial Court Decision dd July 19, 2016 Case No.

А40-118598/2015

Unjustified bonuses to employees recognized as deductible expenses

expenses

Supreme Court Ruling No. 305-КГ16-6003 dd September 16, 2016

Case No. А40-77894/15

Unlawful use of operations transfer to a new company

Supreme Court Ruling No. 305-КГ15-11546 dd January 14, 2016

Case No. А40-138879/14

Qualification of a legally separate Russian entity (limited liability

company) as permanent establishment for its foreign affiliate

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EXAMPLES OF IMPORTANT TAX CASES IN 2016

Moscow City Court Decision dd November 10, 2016 Case No. А40-

113217/2016

Tax optimization of dividends, interest and other payouts under Double

Taxation Treaties is more difficult now

Ural District State Commercial Court Decision No. Ф09-2729/16 dd

September 07, 2016 Case No. A76-11526/2015

No property tax liability for time-worn real estate in need of renovation

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EXAMPLES OF IMPORTANT TAX CASES IN 2016

(i) Performing legal and tax due diligence before entering into contracts

(ii) Checking counterparties and their partners using updated databases

(iii) Not hesitating to call in lawyers and tax consultants

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WE RECOMMEND

Federal laws reforming the arbitration system in Russia entered into force on September 01, 2016

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REVIEW OF CIVIL DISPUTES. ARBITRATION REFORM 2016

ARBITRATION REFORM 2016. AMENDMENTS

Support from state commercial courts / obtaining evidence / appointment and contestation of arbitrators

Institutional arbitration will be mostly used for commercial disputes resolution / ad hoc arbitration courts are used with limitations

New rules are established for arbitration agreement

Certain categories of disputes cannot be arbitrated

Corporate disputes can now be examined by state commercial commercial courts

New rules for enforcement and challenge of an arbitral award

Licensing for foreign arbitration institutions

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(i) Checking which disputes should be examined by state courts

(ii) Reviewing charter and considering the resolution of corporate disputes

(iii) Negotiating arbitration clauses carefully

(iv) Still applying to state courts courts to obtain evidence

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WE RECOMMEND

The Commercial Division of the Supreme Court recently started issuing rulings

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REVIEW OF CIVIL DISPUTES. SUPREME COURT TOOK OVER SCC

REVIEW OF CIVIL DISPUTES Case No. A21-8191/2013

Award enforced in Russia at the location where a foreign entity holds its

assets

Ruling No. 18 on customs issues dd May 16, 2016

Examination of a declarant’s actions upon import of goods at a low value

Refund of overpaid customs duties

Modification of the customs value verification process

Ruling No. 309-ES16-8125 dd October 21, 2016

Rental payments for premises to cover land plot use as well, unless

otherwise expressly provided in the lease agreement

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REVIEW OF CIVIL DISPUTES Ruling No. 305-KG16-6316 dd September 01, 2016

Real estate property injunctions do not preclude assignment of pledge

rights

Ruling No. 305-ES16-6303 dd September 02, 2016

Currency devaluation is no sufficient ground for revision of a loan

agreement or credit contract

Ruling No. 306-ES15-8369 dd April 04, 2016

Protection of pledgee’s interests – the pledgee relied on the validity and

relevance of records in the State Register of Rights to Real Estate

and Related Transactions

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PERSONAL DATA LOCALIZATION RULES. LINKEDIN BAN CASE

LinkedIn has been blocked based on the Federal Law On Personal Data requiring companies to store personal data of Russian citizens in Russia

The first instance court decision was upheld by Moscow City Court on November 10, 2016 and LinkedIn ban is now in force

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PASSION FOR RESULTS