As early as 1 January 2015, a number of new tax law concepts could well be incorporated in the Tax Code as a result of the apparent ongoing ‘de-offshorisation’ offensive that is influencing Russian legislation.
The CFC concept continues to be developed as the bill prepared by the Russian Ministry of Finance (as previously reported in LCDR No. 256) has been seriously amended as a result of pre-parliamentary discussions.
Two other bills supporting the de-offshorisation offensive have already reached the State Duma, even though their first reading has not yet been scheduled. On 5 June 2014, a bill to ratify the OECD Convention on Mutual Administrative Assistance in Tax Matters – which will provide mechanisms to give the Russian tax authorities access to information kept by tax authorities in certain offshore jurisdictions – was submitted to the State Duma. It was preceded on 23 May 2014 by a bill intending to specify the concept of unjustified tax benefit previously developed in Decree No. 53 of the Plenum of the Supreme Commercial Court dated 12 October 2006.
The latter bill introduces the concepts of ‘good faith conduct of a taxpayer’ and ‘abuse of rights’ to the Tax Code. A taxpayer will be presumed to have acted in good faith when they duly perform their tax obligations unless and until the tax authorities establish that an abuse of rights was committed. In this context, an abuse of rights will mean that commercial operations were mainly conducted with the intention of tax evasion or to become wrongfully eligible for a tax refund. If, as a result of a tax audit, the tax authorities establish an abuse of rights by a taxpayer, this may lead to additional taxes being due, the non-deductibility of expenses and ineligibility for tax refunds.
The draftsmen claim that introducing these new concepts should help to create favourable business conditions for good faith taxpayers by eliminating unfair competition from those who abuse the system. As stated in the bill’s explanatory note, it aims to prevent the use of aggressive tax optimisation schemes.
Taxpayers will still retain some leeway in relation to the tax structuring of their operations, but, nonetheless, they should make sure, even before the bill is enacted, that their policy complies with the spirit of the bill and adjust it as appropriate.